US stocks climbed again Wednesday as Bernie Sanders gave up his presidential bid and Wall Street parsed signs that the spread of the coronavirus is beginning to slow in hard-hit areas.
The Dow Jones industrial average rose 779.71 points, or as Sanders, a self-described socialist whose tax-and-spend ideas like “Medicare for All” were widely feared on Wall Street, bowed out of the race for the Democratic presidential nomination, making Joe Biden the presumptive nominee.
The S&P 500 and Nasdaq composite also climbed 3.4 percent and 2.6 percent, respectively, after closing Tuesday in the red.
As for the coronavirus, investors held onto optimism as Dr. Anthony Fauci, the feds’ top infectious disease expert, said the US may be able to reopen schools by the fall as officials work to contain the crisis. President Trump himself suggested Tuesday that the country is near the top of the pandemic’s “curve.”
Investors are grasping “the reality that there is a backside to this, that there’s going to be a restart in the economy,” said Eric Marshall, director of research at Hodges Capital Management.
“There’s some companies that have been more affected than others; however, for the first couple weeks of this selloff it was just an indiscriminate amount of selling out there,” Marshall added.
But experts warn that the market could tumble again as the coronavirus wreaks havoc on the economy. Unemployment is expected to skyrocket and economic growth will likely crater as many business remain closed to get the virus under control.
“If it seems like we’re out of the woods, it’s only because we’re like Goldilocks and we’ve just gone into the bears’ cabin,” said Nancy Davis, chief investment officer at Quadratic Capital and portfolio manager of the IVOL exchange-traded fund. “Now we find out if all the policy measures are too much, too little or just right.”
All three Wall Street indexes gave up big gains Tuesday as investors grappled with the growth of the pandemic as well as a drop in oil prices. The dip came as the number of coronavirus deaths in a single day reached new highs nationwide and in New York, where 779 fatalities were reported Wednesday.
But shares in smaller companies have gotten a boost this week, which Marshall said is encouraging “because that’s normally what you see in a recovery.” The Russell 2000 index of small stocks outperformed blue-chip benchmarks by closing slightly higher Tuesday and rising as much as 3.7 percent Wednesday.
This week’s gains came ahead of the feds’ jobless claims report on Thursday, which is expected to show millions more Americans applying for unemployment benefits last week. Russia, Saudi Arabia and other countries are also expected to meet Thursday about a deal to cut oil production following a plummet in crude prices.
Bad news on either front could spoil investors’ enthusiasm toward the end of the week, according to Donald Selkin, chief market strategist at Newbridge Securities.
“All other things being equal you’d rather not see the market go into a major events on an upswing because then it sets itself up for disappointment,” Selkin said.