Stocks jump for a second day, Dow gains more than 400 points

Stocks rose on Tuesday, building on the strong gains from the previous session, as investors grew more optimistic about a decline in new coronavirus cases.

The Dow Jones Industrial Average traded 455 points higher, or 2%. The S&P 500 gained 1.8% while the Nasdaq Composite climbed 1.2%. The major averages were well off their session highs, however. Earlier in the day, the Dow was up more than 800 points. 

“Investors chose to accentuate the positives, as they have been mostly doing since the bear-market low,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note to clients. “In our opinion, we are in the midst of a Great Rebalancing away from bonds and into stocks.”

“The bear market has most likely discounted a depression-like recession packed into Q2 and Q3,” he said. “It certainly hasn’t discounted the possibility of an actual apocalyptic depression lasting through at least 2021 and beyond. On the contrary, the market’s recent action suggests that investors are betting on an economic recovery starting during Q4 and continuing through 2021.”

Carnival, Norwegian Cruise Line and Royal Caribbean all surged more than 18%. United Airlines and MGM Resorts jumped more than 9% each. Dow Inc led the 30-stock average higher with a 13.2% gain. Darden Restaurants rallied more than 12% after the restaurant company said it has not used any cash from a $750 million revolving credit agreement. 

The move higher came after a series of positive coronavirus developments from around the world. 

In the U.S., the number of new cases appears to have fallen in recent days from their recent peak. On Tuesday, New York Gov. Andrew Cuomo reported the state’s biggest one-day jump in deaths, but also said hospitalizations are slowing. Italy and Spain, two of the hardest-hit countries, are also seeing new cases fall off. 

In Asia, South Korea reported less than 50 new cases of infection for the second day running. China also posted no new deaths as of April 6 for the first time since January when it started publishing daily updates. The two Asian countries were among those which saw spikes in infection rates earlier in the outbreak, with the first cases being reported out of China.

Stocks surged on Monday as a slew of coronavirus headlines pointed to a potential stabilization in the U.S. The Dow soared 1,600 points, posting its third biggest point gain ever. The S&P 500 jumped 7% to its highest level since March 13.

The S&P 500 is up 24.7% from its 52-week low set March 23 while the Dow has bounced 28% from its low.

Keith Lerner, chief market strategist at Truist/SunTrust Advisory, said the market reached its peak of indiscriminate selling after hitting its late March lows. 

“That’s the first part of any type of bottoming process,” Lerner said. “Then you start seeing differentiation in the market; you start to see winners and losers as opposed to wholesale selling.”

President Donald Trump said in a press conference Monday there’s “tremendous light at the end of the tunnel’ with ten different therapeutic agents in active trials. Trump echoed comments by World Health Organization officials who said the research to develop vaccines and treatments has “accelerated at incredible speed.”

“The apex in New York state is likely imminent as opposed to one month out,” Marko Kolanovic, JPMorgan’s global head of macro quantitative and derivatives strategy, said in a note on Monday. “Big data indicated very early on that social distancing is working overall.” 

Kolanovic also said in a conference call he expects a “limited” re-opening of the economy in two weeks. 

Still, the cases in the U.S., the world’s most affected country, topped 368,000 with at least 10,000 deaths, according to data from Johns Hopkins University. 

Stocks are still in bear-market territory with the S&P 500 about 20% off its record high. Many on Wall Street believe stocks haven’t fully priced in the potential corporate earnings collapse as the coronavirus outbreak has virtually shut down the global economy.

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