Stocks moved broadly higher on Wall Street Tuesday as the White House and a number of state governors weigh how to gradually reopen the economy following some signs that the coronavirus pandemic may be leveling off in some of the hardest-hit areas.
Traders also had their eye on Johnson & Johnson, JPMorgan Chase and other big companies issuing their earnings reports for the first three months of the year in hopes of getting a better idea of how much their profits this year will take a hit from the outbreak.
The S&P 500 was up 2.1% as of 11:45 a.m. Eastern time, recovering all of its losses from a day earlier. The benchmark index surged 12% last week, though it remains about 18% below its all-time high set in February.
Technology and health care stocks powered much of the broad rally. That helped drive the Dow Jones Industrial Average 405 points higher, or 1.7%, to 23,793. The Nasdaq rose 2.9%.
European markets were mostly higher after reopening following a holiday. Asian markets ended mostly higher.
Bond prices rose. The yield on the 10-year Treasury fell to 0.73% from 0.75% late Monday.
Oil prices fell. Benchmark U.S. crude rose was down $1.19, or 5.3%, to $21.23. Brent, the international standard, dropped $1.57 to $30.14 a barrel.
Tentative optimism that the outbreak has begun to plateau in some areas plus unprecedented infusions of support from the Federal Reserve and the government have helped drive stocks higher this month. But this week stocks could be in for more volatility as companies serve up their first-quarter results.
While Wall Street expects profits will be down for most companies in the S&P 500, the focus is on what management teams have to say about what their prospects for profits look like for the rest of the year. That might prove difficult. With all the uncertainties about when economies may reopen, many companies have simply pulled their profit and sales forecasts for the year altogether.
Johnson & Johnson was a bright spot Tuesday, reporting a stronger profit for the first three months of the year than Wall Street expected. The health care products company is feeling the effects of the coronavirus crunch, however. It cut its sales forecast for the year, but not by much more than Wall Street had already done on its own. J&J even raised its dividend, bucking a broader trend as companies try to conserve cash. Its stock rose 4.6%.
JPMorgan Chase and Wells Fargo did not fare as well. Their earnings fell short of Wall Street’s expectations as the banks set aside billions to protect themselves against future losses from potentially bad loans due to the coronavirus pandemic.
JPMorgan’s stock initially rose 1%, but the gain soon gave way to a 4.5% drop. Wells Fargo, whose profits plunged nearly 90% in the first quarter, was down 4.9%. Other big banks also fell. Bank of America slid 3% and Citigroup lost 6.3%. Both are due report their results Wednesday.
Across Wall Street, analysts are forecasting a drop of roughly 10% in earnings per share for S&P 500 companies for the first quarter and 21% for the second quarter.
Given how big and unprecedented the coronavirus shock to the economy has been, analysts admit they are flying close to blind in trying to guess how bad corporate earnings will get hit. At Deutsche Bank, Chief Global Strategist Binky Chadha said his usual methods of forecasting earnings based on economic growth or surveys measuring business activity “are essentially broken.”
The key to profits this year, given the plunge in revenues across industries, is how quickly and by how much a company can cut its costs, Chadha wrote in a report.
Apart from earnings, investors continue to keep an eye on the COVID-19 case data for clues as to whether the outbreak will wane enough for government officials to relax the social distancing guidelines and business closures that have ground much of the economy to a halt and left a record number of Americans suddenly unemployed.
There are more than 1.94 million confirmed coronavirus cases worldwide, led by the United States with more than 583,000, according to a tally by Johns Hopkins University.
Positive signs in New York and other areas that have seen a big share of COVID-19 cases are fueling a debate in Washington and among state governors about when and how to reopen the economy.
Anxious to put the crisis behind him, President Donald Trump has been discussing with senior aides how to roll back federal social distancing recommendations that expire at the end of the month.
The economic damage has been widespread and severe after only a few weeks into the shutdown. The International Monetary Fund said Tuesday that the world economy will suffer its worst year since the Great Depression.