Wall Street surged on Wednesday as oil prices recovered and Congress looked on course to approve nearly $US 500 billion more in aid to help small businesses ride out the coronavirus crisis.
US crude and benchmark Brent prices climbed after a collapse in the past two days, sending the S&P 500 energy index up 3.6 per cent.
All 11 S&P 500 sector indexes traded higher as the US Senate unanimously approved the new relief package, adding to trillions of dollars in stimulus that have helped Wall Street rebound from its March lows.
The House of Representatives is expected to clear the bill on Thursday.
“The (stimulus) response times have been way faster than what you saw in 2008. What you’re seeing is the tail risk removal that stops the equity downturn and allows the market to actually look,” said Anik Sen, global head of equities at PineBridge Investments in New York.
The benchmark S&P 500 is 17 per cent below its February record high as state-wide shutdowns have sparked lay-offs and crushed consumer spending, putting several industries at risk of collapse.
Estimates for US jobless claims for the latest week ranged as high as 5.5 million, while a reading on April US factory activity was likely to fall to levels last seen during the 2008 financial crisis. Both reports are due on Thursday.
Analysts have drastically cut their S&P 500 earnings expectations for the first and second quarters and are now projecting a corporate recession for 2020, according to IBES data from Refinitiv.
A week after the big U. banks issued dismal 2020 forecasts, consumer discretionary and technology firms fared slightly better as the lockdown measures boosted demand for online streaming and home delivery of meals.
“I think this earnings season is really going to be a function of which companies and which industries are holding up … and are able to withstand the decline in this market and to ride it out,” said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.
Investors will also be paying close attention to capital allocation from companies, Perez added, “You have to have the cash to sustain and ride out to the other side.”
Burrito chain Mexican Grill Inc jumped about 14 per cent after it reported soaring digital and home delivery sales and said it had enough cash and liquidity to get through the next year.
Netflix Inc more than doubled its own projections for new customers in the first quarter. However, its shares fell 2.9 per cent as it forecast a weaker second half if the lockdown measures are lifted.
The Russell 2000 index of US small-cap stocks rallied 1.3 per cent but it remains down nearly 30 per cent from its February high, reflecting smaller companies’ recent underperformance companied to Wall Street’s largest firms.
“Small caps and mid-caps still haven’t seen a recovery, and that tells me the economy is still in question,” warned Ben Philips, Chief Investment Officer of the EventShares ETF .
With volatility the new normal on Wall Street, the Dow Jones Industrial Average was up 1.99 per cent at 23,475.82 points, while the S&P 500 gained 2.29 per cent to 2,799.31.
The Nasdaq Composite added 2.81 per cent to 8,495.38.
Advancing issues outnumbered declining ones on the NYSE by a 2.48-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favored advancers.
The S&P 500 posted four new 52-week highs and two new lows; the Nasdaq Composite recorded 24 new highs and 19 new lows.