By Anna Hirtenstein, Caitlin McCabe and Chong Koh Ping
U.S. stocks soared higher Thursday, even after data showed the ranks of unemployed Americans surged in the past week, signaling that investors remain hopeful that a $2 trillion stimulus package can help save the country's weakening economy.
The Dow Jones Industrial Average climbed 4.8% by mid-afternoon, putting the blue-chip index on track to possibly finish the day in a bull market -- a move that would mark the shortest bear market for the index in history. The S&P 500 gained 4.4%, and tech-heavy Nasdaq Composite added 3.7%.
Investors had been jittery leading up to the release of the latest unemployment benefits data, unsure of how severely the coronavirus pandemic had ripped through the U.S. labor force. Futures tied to U.S. stocks had declined steeply earlier in the morning, yet pared their losses after it was announced that an unprecedented 3.28 million workers filed for unemployment benefits -- five times the previous record high.
The surge in all three indexes after the opening bell marked the third time this week that U.S. stocks opened higher, following a month of steep losses and wild turbulence as the fallout from coronavirus worsened. And even as Thursday's jobless claims revealed that the economic toll of the outbreak is as severe as anticipated, some investors were already looking ahead to the ultimate passage of the largest fiscal stimulus package in the U.S. in recent memory.
The Senate on Wednesday approved the relief plan, which would provide direct payments to Americans and loans to large and small companies, among other measures. The House is expected to consider the bill Friday. If approved, it would head to President Trump.
"Investors believe data like today will make it more likely that the House will pass the stimulus bill," said Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co. "The deeper and the worse the numbers are in the near term, the more possibility there is for a [fiscal] response, which powers the rebound on the other side."
If the Dow industrials are to reach a bull market Thursday, it would occur just three days after the index reached its recent low. The S&P 500 and the Nasdaq still remain far from a possible bull market.
Gains throughout Thursday morning were broad, with all 11 sectors of the S&P 500 up for the day. Dow heavyweight Boeing Company surged 13% on news that the aerospace giant could receive billions of dollars of assistance from the stimulus deal.
The S&P 500's energy sector also continued to see sharp gains Thursday. Marathon Oil surged 11%, Exxon Mobil jumped 2.8%, and Chevron gained 8.5%. Stocks in the sector had been particularly battered by weeks of market downturn, pushed lower, in part, by evidence that the pandemic is leading to an unprecedented decline in energy demand.
Still, oil prices slid Thursday. Brent crude, the global gauge of oil prices, dropped 2.7% to $29.19.
Even as investors looked ahead to the stimulus bill, there's no guarantee that it will be enough to blunt the economic fallout from the coronavirus outbreak. Nearly 70,000 people have been infected by the virus, and more than 1,000 have died. The U.S. now trails only China and Italy in the number of confirmed cases, even as emergency measures to contain the outbreak has shuttered businesses and sidelined workers.
"The reality is that there's still a lot of uncertainty to the degree to which the virus disrupts economic activity. Markets are digesting that, " said Anthony Rayner, a multiasset fund manager at Premier Miton. "There's almost a point where the more policy makers do, whether it's monetary or fiscal, the more people panic in a way."
Federal Reserve Chairman Jerome Powell said Thursday morning that he expected economic activity to decline "pretty substantially" in the second quarter, following estimates from economists last week that U.S. GDP could shrink during the period far worse than it did the Great Recession.
The central bank is taking unprecedented action to help ensure economic activity can resume as soon as the coronavirus pandemic is under control, Mr. Powell added in a rare television interview on NBC's Today show.
Still, some market observers cautioned Thursday that the U.S. stocks rally could likely be temporary -- especially as more economic data emerge. Analysts also expect a sharp decline in corporate earnings in the month ahead.
"The market is showing a little bit of relief, but frankly, that doesn't mean that it's going to persist," said Solita Marcelli, deputy chief investment officer for the Americas at UBS Global Wealth Management. "We still have a lot of things that are unknown."
Investors moved into government bonds Thursday, causing the benchmark on the 10-year U.S. Treasury to retreat to 0.826%, from 0.854% Wednesday.
Outside of the U.S., the pan-continental Stoxx Europe 600 rallied 2.6% after declining for part of the day. The European Central Bank "broke new ground," said Florian Hense, an economist at Berenberg Bank in a note, after it gave itself more flexibility on its additional EUR750 billion ($821 billion) bond-purchase program.
Meanwhile, most major stock markets in the Asia-Pacific region closed lower. Japan's Nikkei 225 lost 4.5%. Singapore's FTSE Straits Times Index shed 1% after the country forecast that the economy could contract by up to 4% in 2020 in its first full-year recession since 2001.
Write to Anna Hirtenstein at email@example.com, Caitlin McCabe at firstname.lastname@example.org and Chong Koh Ping at email@example.com
(END) Dow Jones Newswires
March 26, 2020 13:44 ET (17:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.