Wall Street surged on Wednesday as oil prices recovered and Congress looked on course to approve nearly $500 billion more in aid to help small businesses ride out the coronavirus crisis.
U.S. crude and benchmark Brent prices climbed after a collapse in the past two days, sending the S&P 500 energy index up 3.6%.
All 11 S&P 500 sector indexes traded higher after the U.S. Senate unanimously approved the new relief package, adding to trillions of dollars in stimulus that have helped Wall Street rebound from its March lows.
The House of Representatives is expected to clear the bill on Thursday.
"The (stimulus) response times have been way faster than what you saw in 2008. What you're seeing is the tail risk removal that stops the equity downturn and allows the market to actually look," said Anik Sen, global head of equities at PineBridge Investments in New York.
The benchmark S&P 500 is 17% below its February record high as statewide shutdowns have sparked layoffs and crushed consumer spending, putting several industries at risk of collapse.
Estimates for U.S. jobless claims for the latest week ranged as high as 5.5 million, while a reading on April U.S. factory activity was likely to fall to levels last seen during the 2008 financial crisis. Both reports are due Thursday.
Analysts have drastically cut their S&P 500 earnings expectations for the first and second quarters and are now projecting a corporate recession for 2020, according to IBES data from Refinitiv.
A week after the big U.S. banks issued dismal 2020 forecasts, consumer discretionary and technology firms fared slightly better as the lockdown measures boosted demand for online streaming and home delivery of meals.
Investors will also be paying close attention to capital allocation from companies, Perez added, "You have to have the cash to sustain and ride out to the other side."
Amid Wednesday’s rally, many investors remained cautious about the outlook for the spread of the coronavirus and the damage it will ultimately do to the global economy.
"There is no transparency as to when the coronavirus cases are going to fall off a cliff and we are going to have confidence that we are going back to our normal economy. If you are optimistic, you could think mid-May, but if you are pessimistic, you may think October, and that's a big difference," said Mike Zigmont, head of Trading at Harvest Volatility Management in New York.
Burrito chain Mexican Grill Inc jumped about 14% after it reported soaring digital and home delivery sales and said it had enough cash and liquidity to get through the next year.
Netflix Inc more than doubled its own projections for new customers in the first quarter. However, its shares fell 2.9% as it forecast a weaker second half if the lockdown measures are lifted.
The Russell 2000 index of U.S. small-cap stocks rallied 1.4% but it remains down nearly 30% from its February high, reflecting smaller companies' recent underperformance compared to Wall Street's largest firms.
"Small caps and mid-caps still haven't seen a recovery, and that tells me the economy is still in question," warned Ben Philips, Chief Investment Officer of the EventShares ETF .
With volatility the new normal on Wall Street, the Dow Jones Industrial Average rose 456.94 points, or 1.99%, to 23,475.82, the S&P 500 gained 62.75 points, or 2.29%, to 2,799.31 and the Nasdaq Composite added 232.15 points, or 2.81%, to 8,495.38.
Volume on U.S. exchanges was 10.3 billion shares, compared with a 13 billion-share average over the last 20 trading days. Many traders believe low-volume days reflect a lack of conviction among investors.
The Philadelphia Semiconductor index surged 5.9%, its biggest one-day leap since April 6.
Advancing issues outnumbered declining ones on the NYSE by a 2.48-to-1 ratio; on Nasdaq, a 2.00-to-1 ratio favored advancers.
The S&P 500 posted four new 52-week highs and two new lows; the Nasdaq Composite recorded 24 new highs and 19 new lows.
GLOBAL MARKETS
A jump in the price of oil and the promise of more government stimulus to ease the economic pain inflicted by the coronavirus pandemic helped global equity markets surge on Wednesday, prompting investors to edge out of perceived safe-haven assets like U.S. Treasuries.
U.S. crude and Brent both rose more than 7% after touching their lowest levels since 1999 on the prospects for further production cuts to reduce the glut in the oil market.
MSCI's gauge of stocks across the globe> gained 1.76% following a broad rally in Europe and slight losses in Asia.
A historic two-day plunge in the oil market, which sent futures contracts negative for the first time in history, had erased more than 1,000 points from the Dow before Wednesday's open.
Better-than-expected U.S. corporate earnings helped lift equities, said Daniel Morris, senior investment strategist at BNP Paribas Asset Management.
"Markets do seem to have recovered too far, too quickly, given the uncertainty about the depth and duration of the downturn and a correction is still probable," said Morris.
"But if the negative sentiment reflected in gold and bond yields turns out to be overdone, and the fall in GDP is less than the most extreme estimates indicate, valuations are not unreasonable."
The U.S. Congress will pass a nearly $500 billion coronavirus aid bill on Thursday, House Speaker Nancy Pelosi said, that includes an additional $321 billion for a previously set-up small business lending program that quickly saw its funds exhausted.
"Though this bill will address some of the shortfalls, this will not likely be the end for stimulus," according to a note from BofA Global Research, adding that the firm expects Congress to pass another large package worth up to $1.5 trillion.
Gains in the oil market helped draw investors into riskier assets, pulling government bond yields higher. Benchmark 10-year notes last fell 17/32 in price to yield 0.6222%, from 0.571% late on Tuesday.
European Union leaders will meet on Thursday to discuss measures to increase aid to help the region cope with the coronavirus outbreak.
Traders were also buoyed after Italy breezed through a major debt sale on Tuesday and speculation continued that the European Central Bank would provide more support measures.
U.S. crude recently rose 20.05% to $13.89 per barrel and Brent was at $20.70, up 7.09% on the day.
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