Stocks rose on Wednesday amid hope the U.S. could start to turn a corner on the coronavirus outbreak in the near future. Equities also got a boost after Sen. Bernie Sanders dropped out of the presidential race.
The major averages hit their session highs after Sanders made his announcement. Some of Sanders’ policy proposals, including Medicare for All, raised concern among several business owners and investors who feared taxes would go up under a Sanders presidency.
In the U.S., the number of daily increases in coronavirus cases has fallen since Friday, according to data from Johns Hopkins University. Daily increases in global cases have also fallen since then.
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told Fox News on Wednesday that the U.S. death count related to the coronavirus is now lower than initially thought, noting there should be a turnaround after this week. He added, however, virus efforts should be intensified.
“If the curve is bending, for the first time, some time-line is coming into focus for restarting at least parts of the economy,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “This means investors can start to reduce their best guesses as to how long this recession will last and even if the recession is very deep, if its duration can be shortened and known with some greater clarity, this would tend to raise the value of the stock market.”
Stocks pressured by the coronavirus outbreak led the way higher. Carnival, Norwegian Cruise Line and Royal Caribbean all advanced at least 2.6%. MGM Resorts gained 6.5% while Wynn Resorts climbed 5.3%. United led airline stocks higher with a 6.6% jump. American and Delta traded higher by 4.5% and 2.7%, respectively.
However, some investors believe equities were getting ahead of reality where coronavirus shutdowns are likely to weigh on the economy significantly beyond the second quarter. The major averages have rallied about 20% from their March 23 lows.
The uncertainty around the coronavirus has also pressured corporate earnings estimates. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, thinks they could fall even more.
“We are still in the early innings of downward EPS revisions,” Calvasina wrote in a note to clients. “Further downward revisions could keep equity market conditions choppy for the time being.”
On Tuesday, the Dow Jones Industrial Average fell 26 points or 0.1%, giving up a 900-point surge from earlier in the day.
The Federal Open Market Committee is set to publish on Wednesday afternoon its meeting minutes from its March meeting. In an emergency decision ahead of that meeting, the Fed cut interest rates to zero, for the first time since the financial crisis.
Although the Fed’s minutes shouldn’t be market moving, investors will get some insight into what the central bank is using as justification for its historic easing measures.
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