NEW YORK -- Investors grabbed hold of a few glimmers of hope Monday that the coronavirus pandemic could be slowing and sent stocks surging in a worldwide rally, capped by a 7% leap for the U.S. market.
The number of new covid-19 cases is dropping in the European hot spots of Italy and Spain. The center of the U.S. outbreak, New York, also reported its number of daily deaths has been effectively flat for two days. Even though the U.S. is still bracing for a surge of deaths due to covid-19 and New York's governor said restrictions should stay in place to slow its spread, the encouraging signs were enough to launch the S&P 500 to its best day in nearly two weeks.
The S&P 500 climbed 175.03 points, or 7%, to 2,663.68, and nearly all the stocks in the index were higher. It more than recovered its losses from last week, when the government reported a record number of layoffs sweeping the economy.
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The Dow Jones Industrial Average shot up 1,627.46 points, or 7.7%, to 22,679.99, and the Nasdaq rose 540.15, or 7.3%, to 7,913.24.
"We're running on raw optimism, maybe that's the best way to put it," said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research.
The S&P 500's gains accelerated throughout the day, and markets in Europe and Asia rose nearly as much. In another sign that investors are feeling a bit less pessimistic about the economy's path, they sold bonds. The yield on the 10-year Treasury rose for the first time in four days.
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Investors have been waiting anxiously for signs that the rate of new infections may hit its peak, which would give some clarity about how long the looming recession will last and how deep it will be. Without that, markets have been guessing about how long businesses will remain shut down, companies will lay off workers and flights remain canceled due to measures meant to slow the speed of the outbreak.
"The virus is not everything, it's the only thing, and nothing else really matters" to the markets, Frederick said, particularly in a week that is relatively light on economic reports.
The latest gains are not likely to have much staying power, given how much uncertainty remains about when the pandemic will subside significantly and how much harm will have been inflicted to the economy, said Nela Richardson, investment strategist at Edward Jones.
"It's not unusual, if you look back historically, within bear markets to have rallies," Richardson said. "I wouldn't take the uptick over the last two weeks as a sign of a bottoming or a sign of upside recovery from here on out. There's still a lot of uncertainty to get through even as we're hopefully nearing the peak in terms of new coronavirus cases."
The S&P 500 is still down more than 21% since its record set in February, but the losses have been slowing since Washington promised aid to prop up the economy.
"Since this is a public health crisis, the response has been extreme," Morgan Stanley strategists wrote in a report. "There are literally no governors on the amount of monetary or fiscal stimulus that will be used in this fight."
In Japan, the prime minister said he's preparing to announce a $1 trillion package to bolster the world's third-largest economy. It would be Japan's largest-ever package for the economy and nearly twice as much as expected.
Japan's economy was already shrinking late last year before the outbreak pummeled the global economy.
The announcement pushed Japan's Nikkei 225 index to surge 4.2%. Elsewhere in Asia, South Kora's Kospi jumped 3.9%, and Hong Kong's Hang Seng rose 2.2%.
In Europe, Germany's DAX rose 5.8% and France's CAC 40 jumped 4.6%. The FTSE 100 in London rose 3.1%.
The yield on the 10-year Treasury rose to 0.67% from 0.58% late Friday. Yields tend to rise when investors are raising their expectations for economic growth and inflation.
Crude oil fell, giving up some of its gains from the previous week when expectations rose that Saudi Arabia and Russia may cut back on some of their production.
Demand for oil has plummeted due to the weakening economy, and any cutback in production would help prop up its price. A meeting between OPEC, Russia and other producers initially planned for Monday, though, was reportedly pushed back to Thursday.
Benchmark U.S. crude fell $2.26, or 8%, to settle at $26.08 a barrel after surging nearly $7 last week. It started the year above $60 per barrel. Brent crude, the international standard, lost $1.06, or 3.1%, to $33.05 a barrel.
Some areas of the market that have been hit hardest by shutdowns of economic activity soared. Hotel chain Marriott and casino company Wynn, for example, each rose more than 15%. Credit card companies also rallied, after being hammered by soaring unemployment in recent weeks, which makes people less likely to pay their bills. Capital One and Discover Financial both jumped more than 15%. Payment giant Visa rose more than 11%.
Shares of cruise operator Carnival jumped by more than 20% after Saudi Arabia's state investment fund said it has acquired an 8% stake in the company.
"Today is very understandable," said David Bahnsen, chief investment officer of the Bahnsen Group, a private wealth firm based in Newport Beach, Calif., that manages $2.3 billion. "The market is a forward-looking discounting mechanism. And if you worry at the doomsday side of the health models, you get a Dow dropping to 18,000. The better case models have the Dow at 25,000.
"Right now, we are sitting in the middle of those outcomes," Bahnsen said. "The idea that three weeks or three months from now we will be in a worst-case scenario in the health crisis is dissipating. There isn't a single data point that says otherwise. We are talking about medical supplies, hospital capacity, numbers of diagnoses, numbers of deaths. Spain is bending their curve. California's numbers are not moving. The market is anticipating that social distancing works."
Still, there was a strong defensive tilt to trading. The utilities sector -- typically an area dominated by risk-averse investors -- was one of the best performing in the S&P 500, with a gain of almost 8%.
That suggests investors still see plenty of reason to be cautious.
The slow of the spread of the disease is a good first step in reducing the effect on hospitals, but it still could take some time to open the economy more broadly. On Monday, Gov. Andrew Cuomo of New York cautioned that the state was still facing an emergency.
Plus, consumers -- the chief economic engine in the U.S. --- remain worried about how efforts to contain the virus will affect them.
Expectations that unemployment will be higher a year from now rocketed up, as have workers' estimations of the chance that they may lose their jobs, according to the Federal Reserve Bank of New York's Survey of Consumer Expectations.
A more widespread approach to testing that gives companies and consumers confidence that life is returning to some semblance of normal will be crucial, Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman, wrote in an email.
"Progress on that front, or the lack thereof, is a potential source of future market volatility," Clemons wrote. "I don't think we're out of the woods quite yet."
Information for this article was contributed by Stan Choe, Alex Veiga and Elaine Kurtenbach of The Associated Press; by staff members of The New York Times; and by Taylor Telford and Thomas Heath of The Washington Post.
A Section on 04/07/2020