Written by DAMIAN J. TROISE and ALEX VEIGA AP Business Writers, STAN CHOE
With governments making moves toward letting businesses reopen, stocks rallied worldwide on Monday to kick off a busy week for markets.
From Rome, Georgia, to Rome, Italy, companies are watching as politicians detail plans to ease up on restrictions that were meant to slow the coronavirus pandemic but also erased businesses and jobs. Retail chains, cruise lines and other businesses whose profits hinge on people stepping outside their homes jumped to some of Monday’s biggest gains. The S&P 500 climbed 1.5%.
This week is chockablock with potentially market-moving events, including meetings for several of the world’s largest central banks. Nearly a third of the companies in the S&P 500 are also scheduled to report how profitable they were in the first three months of 2020 and, more importantly, perhaps talk about how they see future conditions shaking out.
With central banks and governments promising overwhelming amounts of aid for markets, some investors are looking beyond the economic devastation currently sweeping the world. They’re focusing instead on the potential return of growth as the outbreak levels off in some areas.
Treasury yields pushed higher in an indication of less pessimism in the market, but crude tanked again in the latest extreme swing that’s dominated oil markets in recent weeks.
The S&P 500 rose 41.74 points to 2,878.48. The Dow Jones Industrial Average gained 358.51, or 1.5%, to 24,133.78, and the Nasdaq climbed 95.64, or 1.1%, to 8,730.16.
“We’re in recession, it’s a long recovery from here,” said Joe Seydl, capital markets economist at J.P. Morgan Private Bank. But the distance between those two points “is starting to look a little bit better than a few weeks ago because it looks like we’re past the worst of it.”
Monday’s gains were widespread and accelerated though the day. At the head of the pack were some of the stocks hardest and earliest hit by the coronavirus pandemic.
Banks and other financial companies rose 3.6% for the biggest gain among the 11 sectors that make up the S&P 500. They had tumbled earlier on worries about waves of households and businesses defaulting on their loans.
The reopening of some businesses in Georgia and other states, along with a slowdown in hospitalizations in the hardest-hit state of New York, helped revive financial stocks. So did a rise in Treasury yields, which mean bigger profits for making loans. The sector is still down 26.9% for the year.
Retail chains and real-estate investment trusts that own shopping malls also recovered some of their earlier losses as investors looked toward a future where people visit stores again. Even travel-related stocks, which fell before the rest of the market on worries about the coronavirus outbreak, were strong.
Stocks of smaller companies jumped more than the rest of the market. With smaller financial buffers, small-cap stocks often get punished more than their bigger rivals when investors are anticipating downturns, but they can also rise faster during rebounds. The Russell 2000 of small-cap stocks rose 4%.
The market’s big recent gains, though, are built more on hope for improving conditions than on anything certain. Some investors are worried that reopenings of businesses, if done hastily, could lead to a second wave of infections, and many warn that it’s still too uncertain how long this recession will last.
“The sense I get is people are not going to be comfortable with life as usual,” said Marc Chaikin, founder of Chaikin Analytics. “It’s a big leap of faith to expect that earnings are going to go back to pre-2020 levels.”
Even if the economy is past the worst of its downturn, “it’s going to be a long way back from where we were in 2019,” said Seydl of J.P. Morgan Private Bank.
Markets began Monday with jumps in Asia after Japan’s central bank scrapped its ceiling on how much government debt it will buy to support the economy. Japan’s Nikkei 225 rose 2.7%, while South Korea’s Kospi added 1.8% and the Hang Seng in Hong Kong added 1.9%.
In Europe, Italy laid out a timetable for easing restrictions, and other countries are set to detail their plans soon. The German DAX climbed 3.1%, while the French CAC 40 rose 2.5% and the FTSE 100 in London added 1.6%.
In the U.S., roughly 150 companies in the S&P 500 are scheduled to report earnings this week. That includes the Big Five of Amazon, Apple, Facebook, Microsoft and Google’s parent, Alphabet, which together make up about a fifth of the index.
The yield on the 10-year Treasury rose to 0.65% from 0.59% late Friday. It’s still well below the 1.90% level it was near at the start of the year, though. Yields tend to drop when investors are downgrading their expectations for the economy and inflation.
In energy markets, the cost for a barrel of U.S. oil to be delivered in June fell $4.16, or 24.6%, to settle at $12.78 a barrel. Brent crude, the international standard, fell $1.45, or 6.8%, $19.99 a barrel.
Prices have been swinging wildly as demand for energy collapses and storage tanks come close to topping out.
“There’s a huge oversupply we’ve been left with due to the incredibly sharp drop in consumption,” said Richard Swann, editorial director for Americas oil markets at S&P Global Platts.