Stocks Jump on Hope Spending Blunts Unemployment

March 26, 2020

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(Bloomberg) — U.S. stocks rallied as investors speculated that the $2 trillion rescue package poised to pass Congress will blunt the pandemic’s toll on the economy. Treasuries held gains and the dollar fell for a third day.

The S&P 500 extended its advance past 4%, headed for its first three-day rally since February, with health stocks and utilities leading the way. The Dow Jones Industrial Average climbed 20% above its March 23 trough.

Jobless claims surged to a record 3.28 million Americans last week as businesses shut down to help prevent the spread of the virus. While the reading exceeded estimates, aid from the U.S. government my help offset the damage to workers and businesses. Federal Reserve Chairman Jerome Powell also sought to assure the public that the central bank wouldn’t run out of crisis-fighting ammunition.

“Now that the stimulus bill is moving through, that’s a countervailing force to the rising jobless claims,” said Brian Nick, chief investment strategist at Nuveen. “Hopefully, if all works as intended, businesses should be able to get loans relatively quickly, cease their layoffs and potentially — if they want to get the full benefits of the loans — bring people back that they already laid off.”

The jobless number is one of the first major data points to show the extent of the impact on the American economy since states around the country began widespread business shutdowns aimed at preventing the coronavirus from spreading.

European stocks erased losses and moved higher. Sovereign debt rose after the region’s central bank announced it will scrap limits on bond purchases for its emergency program, a landmark decision that gives it almost unlimited firepower to fight the economic fallout from the virus. The euro strengthened while a gauge of the dollar headed for a third down day.

While rescue measures across major economies are unprecedented, traders remain cognizant of the virus’s escalating toll. The world’s cases now top 451,000, with more than 20,000 deaths. The U.S. death toll has topped 1,000.

“Investors need to remain vigilant about how the growth rate of new cases develops and how governments respond going forward,” said Oliver Blackbourn, a multi-asset portfolio manager at Janus Henderson Investors. “The support package should help to assuage the fears about the worst possible economic outcomes for individuals and companies.”

Elsewhere, oil declined after three days of gains. Gold rose. Emerging-market shares and currencies climbed.

These are the main moves in markets:

Stocks

  • The S&P 500 Index rose 4.6% as of 12:27 p.m. New York time.
  • The Stoxx Europe 600 Index rose 1.8%.
  • The MSCI Asia Pacific Index advanced 0.7%.

Currencies

  • The Bloomberg Dollar Spot Index decreased 1.6%.
  • The euro advanced 1.1% to $1.1022.
  • The British pound increased 2.2% to $1.2138.
  • The Japanese yen advanced 1.4% to 109.65 per dollar.

Bonds

  • The yield on 10-year Treasuries dipped seven basis points to 0.80%.
  • Germany’s 10-year yield decreased 11 basis points to -0.37%.
  • Britain’s 10-year yield fell six basis points to 0.39%.

Commodities

  • Gold rose 1% to $1,632.30 an ounce.
  • WTI crude decreased 4.8% to $23.31 a barrel.

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