Wall Street gained more than 1% on Monday at the onset of a hectic earnings week, as investors turned a hopeful eye toward several U.S. states that are relaxing shutdown restrictions put in place to curb the spread of the COVID-19 pandemic.
All three major U.S. stock averages advanced, and are all now within 20% of their record closing highs reached in February, with the benchmark S&P 500 on track for its best month since 1987, after trillions of stimulus dollars helped U.S. equities claw back much of the ground lost since the coronavirus crisis brought the economy to a grinding halt.
But some analysts believe gains may be limited unless there is progress in finding treatments for the disease.
Several states have begun easing stay-at-home restrictions, in efforts to revive economies and get Americans back to work following crushing job losses.
"In general, I think the steps state governors are taking are the right ones and are measured and careful," said Oliver Pursche, independent asset adviser in New York.
But Pursche cautioned against expecting a quick, 'v-shaped' economic recovery.
"If we start reopening tomorrow and there's no big second wave of infections, I still think it's 6 to 12 months at least until everything is back to normal," Pursche said. "It's much easier to hit 'stop' on an economy than it is to press 'start.'"
Economists expect first-quarter U.S. GDP to have shrunk at a 4% annualized rate when the Commerce Department releases its report on Wednesday.
Market participants will also pay close attention to the U.S. Federal Reserve when it concludes its monetary policy meeting on Wednesday.
The Dow Jones Industrial Average rose 358.51 points, or 1.51%, to 24,133.78, the S&P 500 gained 41.74 points, or 1.47%, to 2,878.48 and the Nasdaq Composite added 95.64 points, or 1.11%, to 8,730.16.
All 11 major sectors of the S&P 500 closed higher, with financials, helped by rising U.S. Treasury yields, posting the largest gains.
A spate of high-profile earnings is expected this week, including Caterpillar Inc, Alphabet Inc, Boeing Co, Facebook Inc, Apple Inc, Amazon.com Inc and others.
Analysts expect first-quarter S&P 500 earnings to have fallen 15% from last year, a dramatic reversal from the 6.3% year-on-year growth forecast at the start of the year, according to Refinitiv data.
The U.S. Supreme Court ruled in favor of health insurers seeking Obamacare payments from the government. The S&P 1500 Managed Care index was up 1.1%.
Tesla Inc jumped 10.1% and gave the Nasdaq its biggest boost after a report said the company was calling some workers back to its California vehicle-assembly plant next week.
Crude oil prices, under pressure amid a supply glut and plunging demand, plummeted 23.3%.
Advancing issues outnumbered declining ones on the NYSE by a 3.36-to-1 ratio; on Nasdaq, a 3.66-to-1 ratio favored advancers.
The S&P 500 posted seven new 52-week highs and no new lows; the Nasdaq Composite recorded 65 new highs and eight new lows.
Volume on U.S. exchanges was 10.64 billion shares, compared with the 12.35 billion average over the last 20 trading days.
GLOBAL MARKETS
Stocks rose across the globe as investors cheered news that more countries and U.S. states were looking to ease lockdowns and the Bank of Japan expanded its stimulus program, while the price of oil continued to crumble as storage runs out.
U.S. energy stocks outperformed the overall market with a 2.1% gain even as U.S. crude prices fell more than 20%.
The U.S. dollar slipped as risk-prone traders cheered lockdown news even as health experts warned that not enough coronavirus testing was in place in the United States. From Italy to New Zealand, governments announced the easing of restrictions, while Britain said it was too early to relax them there. New York state will not reopen for weeks, at the soonest.
The Bank of Japan kicked off a week of central bank meetings by pledging to buy unlimited amounts of government bonds, continuing a trend of historic stimulus announcements to offset the economic effects of the COVID-19 pandemic.
The U.S. Federal Reserve and the European Central Bank meet later in the week, with the ECB expected to increase the size of its bond buying program.
The U.S. state of Georgia began letting residents dine at restaurants and watch movies at theaters as more states, from Minnesota to Mississippi, took steps to ease coronavirus restrictions even though health experts warned it may be too early.
"If we start reopening tomorrow and there's no big second wave of infections, I still think it's 6 to 12 months at least until everything is back to normal," said Oliver Pursche, independent asset adviser in New York.
"It's much easier to hit 'stop' on an economy than it is to press 'start,'" he said.
The pan-European STOXX 600 index rose 1.77% and MSCI's gauge of stocks across the globe gained 1.76%.
Although trillions of dollars in stimulus have helped the S&P 500 recover nearly 30% from its March lows, some analysts say more gains may be capped as the economic damage grows, unless there is progress on treatments for the disease.
"There are so many things that can go wrong in the next six months," said Marc Chaikin, founder of Chaikin Analytics in Philadelphia, adding that "history suggests that bear markets end with a whimper and not a bang."
Emerging market stocks rose 1.81%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.88% higher, while Japan's Nikkei futures rose 1.82%.
OIL DROPS FURTHER
Oil prices weakened sharply on continued concern about oversupply and a lack of storage space. The front-month contract was trading at lower-than-usual volumes as traders moved to later months in futures contracts.
"The market is very concerned about a repeat of negative pricing as the Cushing storage and delivery hub saturates," Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
"The shift of open interest away from June will have negative consequences for the liquidity of the contract, potentially leading to greater volatility in its price," he said.
U.S. crude fell 23.55% to $12.95 per barrel and Brent was at $20.07, down 6.39% on the day.
The U.S. dollar dropped as the broader upbeat mood encouraged investors to move into other currencies.
The dollar index fell 0.17%, with the euro up 0.05% to $1.0825.
The Japanese yen strengthened 0.26% versus the greenback at 107.30 per dollar, while sterling was last trading at $1.2421, up 0.44% on the day.
Bucking the trend, the Brazilian real was on track to close at a record low against the greenback.
U.S. Treasury yields rose, with the benchmark 10-year note last down 20/32 in price to yield 0.6589%, from 0.596% late on Friday.
The 2-year note last dipped less than 1/32 in price to yield 0.2223%, from 0.216%.
Spot gold dropped 0.8% to $1,713.40 an ounce.
The United States and European Union both release first-quarter economic growth numbers this week, while the influential U.S. ISM manufacturing survey is also due.
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