Stocks traded sharply higher Wednesday as reports that a drug manufacturer’s clinical trial for a treatment to help patients recover more quickly from the COVID-19 disease helped to offset news of a plunge in U.S. first-quarter gross domestic product.
Investors will also look forward to the outcome of a two-day Federal Reserve policy meeting, as first-quarter corporate earnings continue to flow in.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, 2.32% rose 492 points, or 2%, to 24,594, while the S&P 500 SPX, 2.72% was up 67 points, or 2.3%, at 2,930. The Nasdaq Composite COMP, 3.34% added 256 points, or 3%, to 8,863.
Stocks gave up early gains Tuesday to end lower, with the Dow snapping a four-day winning streak to close at 24,101.55, down 32.23 points, or 0.1%. The S&P 500 lost 15.09 points, or 0.5%, to close at 2,863.39, while the Nasdaq Composite settled at 8,607.73, down 122.43 points, or 1.4%.
What’s driving the market?
Gilead Sciences Inc.said Wednesday morning that a government-run clinical trial evaluating its experimental drug remdesivir in certain COVID-19 patients met the study’s main goal. The announcement stirred hopes that pharmaceutical companies were making progress toward a treatment of the COVID-19 disease, but investors are still awaiting details from the study.
The news helped to outweigh the bearish impact of a sharp slump in U.S. economic growth in the first quarter, gross domestic product shrinking by 4.8% on an annualized basis.
Economists surveyed by MarketWatch, on average, were looking for a 3.9% fall in GDP after a 2.1% expansion in the fourth quarter. The first-quarter decline is expected to be only a foretaste of the economic carnage caused by the pandemic lockdowns in the current quarter, but some investors are already looking into the future.
“The question is to what extent we get a rebound in Q3 as most everything should be open and hopefully we’ll get more good news from Gilead and other drug companies on therapeutics that could increase the confidence of people to reengage with businesses again via consumer spending,” said Peter Boockvar, chief investment officer at the Bleakley Advisory Group, in a note.
In other U.S. data, pending home sales fell to its lowest level since 2011.
The Fed will also draw some attention later Wednesday. Economists expect the Fed to reassure investors and the public that it will limit the largest economic downturn since the Great Depression.
But few analysts expect the central bank to take new action after a series of emergency measures since March in response to the coronavirus crisis. The Fed has cuts its policy interest rate to nearly zero, started an open-ended bond-buying program, and moved to backstop loans to Main Street to ensure financial markets continue to function.
The Fed will conclude its two-day meeting with a statement, due at 2 p.m. Eastern, followed a half-hour later by Chairman Jerome Powell’s virtual news conference.
Before Tuesday’s pullback in stocks, gains this week were attributed to optimism over efforts by European countries and some U.S. states to begin easing up on lockdowns aimed at slowing the spread of COVID-19, though worries linger that a push to lift restrictions too quickly could see the number of cases reaccelerate.
“Part of the reason the market has rallied so dramatically from its March lows is that investors are having an easier time seeing through the economic devastation in the short-term to how a recovery may develop,” said Michael Reynolds, investment strategy officer at Glenmede, in e-mailed comments.
The global case tally climbed to 3.13 million on Wednesday, according to data aggregated by Johns Hopkins University. The death toll rose to 217,555. At least 935,308 people have recovered. The U.S. has the highest case toll at 1.01 million and the highest death toll at 58,355.
Investors were sifting through another deluge of first-quarter earnings reports.
Which companies are in focus?
- Gilead Sciences Inc. GILD, +7.23% said the trial of its remdesivir drug treatment for COVID-19 met its main goal, and said the National Institute and Infectious Diseases will provide details at an upcoming meeting. The pharmaceutical company’s stock climbed 4.2%, after seeing a halt to trading before the opening bell.
- Google parent Alphabet Inc. GOOG, +8.76% GOOGL, +8.83% delivered first-quarter results after the closing bell Wednesday, with earnings suffering from a “significant slowdown” in ad sales, though revenues topped expectations. Shares were up 9%. Opinion: Google gives Wall Street what it wants, and the stock shoots higher
- Dow component Boeing Inc. BA, +9.34% rose 3.9% after it reported free cash flow was better than forecast, but missed first-quarter revenue and earnings expectations. It also said commercial airplanes fell less than expected.
- Shares of chip maker Advanced Micro Devices Inc. AMD, -2.61% were 2.1% lower, after the company late Wednesday said the COVID-19 pandemic would trim its growth in 2020. First Take:AMD has only one question still lingering about COVID-19 effects
- Starbucks Corp. SBUX, -2.12% shares declined 1.4% in trade after the coffee-chain giant fell short of earnings expectations that had already been trimmed due to worries about the effect of the pandemic on sales.
- Shares of Ford Motor Co. F, were up 1.4% even after the auto maker reported a wider-than-expected first-quarter loss of $2 billion, or 50 cents a share, and missed sales expectations as the coronavirus outbreak continues to eliminate demand for cars, and trucks and keeps factories closed.
- General Electric Co. GE, -2.20% shares were off 2.2%, after the industrial conglomerate reported first-quarter adjusted profit and free cash flow expectations that came in below estimates but topped revenue forecasts. The company said it cut 700 jobs in its power division in the first-quarter.
- Shares of Mastercard Inc. MA, +6.65% climbed 7.6% after topping earnings and revenue expectations for its first quarter
How are other markets trading?
Crude prices recovered slightly, but still remain at depressed levels. West Texas Intermediate oil for June delivery CLM20, 27.80% rose $4.13, or 33%, to $16.47 a barrel, on the New York Mercantile Exchange. Gold for June delivery GCM20, -0.41% fell $7.30, or 0.4%, to $1,714.90 an ounce.
The 10-year Treasury note yield TMUBMUSD10Y, 0.608% was down 1.8 basis points to 0.592%, Tradeweb data show. Bond prices move in the opposite direction of yields.
In overseas equities, the STOXX Europe 600 index SXXP, +1.75% rose 1.4%. China’s benchmark CSI 300 000300, +0.46% index and Hong Kong’s Hang Seng index HSI, +0.27% posted slight gains. Japanese exchanges were closed in observance of the Golden Week holiday.
Originally Published on MarketWatch
