Stocks climbed on some signs the coronavirus outbreak is either levelling off or easing, with traders assessing the first reports of the cloudy corporate earnings season.
The S&P 500 Index extended a rally from its March lows amid a slowdown in new virus cases in key infection hot spots such as New York and Spain.
The Dow Jones Industrial Average rose 299.80 points, or 1.28 per cent, at the open to 23,690.57. The S&P 500 opened higher by 43.47 points, or 1.57 per cent, at 2,805.10, while the Nasdaq Composite gained 160.79 points, or 1.96 per cent, to 8,353.21 at the opening bell.
The Toronto Stock Exchange’s S&P/TSX composite index was up 188.11 points, or 1.34 per cent, at 14,264.05.
JPMorgan Chase & Co. and Wells Fargo & Co. climbed even as their profits were hit by major provisions as the banks expect a spike in consumer and businesses falling behind on debt payments. Johnson & Johnson reined in its outlook for the year ahead, while posting stronger sales and earnings as well as boosting its quarterly dividend. The shares jumped.
Treasuries advanced and the U.S. dollar retreated against its major peers. Oil erased earlier gains as the demand destruction caused by the coronavirus pandemic outweighed planned output cuts from the world’s biggest producers.
As the earnings season kicks off, investors will get a sense of how bad the pandemic could hit global profits. The International Monetary Fund said the “Great Lockdown” recession would be the steepest in almost a century and warned the world economy’s contraction and recovery would be worse than anticipated if the coronavirus lingers or returns. Traders also focused on whether trillions of dollars in stimulus and rescue plans will sustain the rally in risk assets.
“This will be a unique earnings season,” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note. “But it remains critically important because it’ll give us microeconomic insight into the question of ‘How bad is the damage?’ — which remains the single most important question we all need to answer to successfully navigate this market over the medium and longer term.”
Investor pessimism over the pandemic’s economic damage is at “extreme” levels with cash positions the highest since the 9/11 terrorist attacks, according to a Bank of America Corp. survey. Fund managers have shunned risk, with equity allocations the lowest since the 2009 financial crisis, the poll conducted between April 1 and April 7 shows. Cash levels surged to 5.9 per cent from 5.1 per cent in March, signaling peak pessimism to BofA strategists.
With files from Reuters