This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.nytimes.com/2020/04/20/business/stock-market-rally-coronavirus.html
The article has changed 20 times. There is an RSS feed of changes available.
| Version 17 | Version 18 |
|---|---|
| Can Investors Trust the Stock Market Rally? | Can Investors Trust the Stock Market Rally? |
| (7 days later) | |
| Less than a month ago, the stock market was in free fall, as a torrent of bad news about the coronavirus pandemic and its economic fallout drove investors to dump stocks. Just as swiftly, the market has rebounded, even as millions of people lose their jobs every week and the country is destined for a recession. | Less than a month ago, the stock market was in free fall, as a torrent of bad news about the coronavirus pandemic and its economic fallout drove investors to dump stocks. Just as swiftly, the market has rebounded, even as millions of people lose their jobs every week and the country is destined for a recession. |
| Can the rally be trusted? | Can the rally be trusted? |
| The word on Wall Street is a tentative yes. More people are embracing the idea that stocks have “bottomed” — investor parlance for the lowest the market will go — and won’t fall below the depths they reached on March 23, when the S&P 500 stock index was 34 percent below its high from just over a month earlier. | The word on Wall Street is a tentative yes. More people are embracing the idea that stocks have “bottomed” — investor parlance for the lowest the market will go — and won’t fall below the depths they reached on March 23, when the S&P 500 stock index was 34 percent below its high from just over a month earlier. |
| Don’t celebrate just yet: Even if they don’t anticipate another sharp plunge, most observers hardly expect the market to soar, either. Investors who are wading back into the water are getting confusing signals: Quarterly earnings are shrinking and corporate reports provide few clues about the future, while rising stock prices are hard to square with the mounting toll of an unprecedented economic collapse. | Don’t celebrate just yet: Even if they don’t anticipate another sharp plunge, most observers hardly expect the market to soar, either. Investors who are wading back into the water are getting confusing signals: Quarterly earnings are shrinking and corporate reports provide few clues about the future, while rising stock prices are hard to square with the mounting toll of an unprecedented economic collapse. |
| What’s more, the combination of rising shares and reduced profits is making the market look incredibly expensive, according to a metric widely used by investors to value the market, the price-to-earnings ratio. | What’s more, the combination of rising shares and reduced profits is making the market look incredibly expensive, according to a metric widely used by investors to value the market, the price-to-earnings ratio. |
| “Right now you’re kind of in this no man’s land, purgatory,” said Brian Belski, chief investment strategist with BMO Capital Markets. “Earnings aren’t going to give you the answer. The economy’s certainly not going to give you the answer. They’re byproducts of the pandemic.” | “Right now you’re kind of in this no man’s land, purgatory,” said Brian Belski, chief investment strategist with BMO Capital Markets. “Earnings aren’t going to give you the answer. The economy’s certainly not going to give you the answer. They’re byproducts of the pandemic.” |
| If there’s one thing analysts and investors agree on, it’s that neither the optimists nor the pessimists are firmly in control of the market’s direction at the moment. That’s because the path of the coronavirus crisis is impossible to predict. | If there’s one thing analysts and investors agree on, it’s that neither the optimists nor the pessimists are firmly in control of the market’s direction at the moment. That’s because the path of the coronavirus crisis is impossible to predict. |
| Initially, as the outbreak spread across the country, forcing local governments to shut down economies and people to stay at home, the market’s reaction was unanimous. Starting in late February, trading turned highly volatile, leading the S&P 500 to its steepest drop into a bear market since 1933. By March 23, the plunge had incinerated almost $10 trillion in wealth and ended an 11-year bull run. | Initially, as the outbreak spread across the country, forcing local governments to shut down economies and people to stay at home, the market’s reaction was unanimous. Starting in late February, trading turned highly volatile, leading the S&P 500 to its steepest drop into a bear market since 1933. By March 23, the plunge had incinerated almost $10 trillion in wealth and ended an 11-year bull run. |
| Just as suddenly, stocks staged an about-face in the last week of March, after the Federal Reserve announced plans to pump trillions of dollars of new money into the markets and Congress passed a $2 trillion economic rescue package. The announcements — along with some signs of early success in “flattening the curve” of the outbreak in New York — set off a remarkable rally of more than 25 percent, catching many investors off guard and helping the S&P 500 reclaim more than half its previous losses. | Just as suddenly, stocks staged an about-face in the last week of March, after the Federal Reserve announced plans to pump trillions of dollars of new money into the markets and Congress passed a $2 trillion economic rescue package. The announcements — along with some signs of early success in “flattening the curve” of the outbreak in New York — set off a remarkable rally of more than 25 percent, catching many investors off guard and helping the S&P 500 reclaim more than half its previous losses. |
| In recent days, though, stocks have settled into a middle zone: far from the low levels that clearly signaled a bear market, but not conclusively blossoming into a new bull market, either. | In recent days, though, stocks have settled into a middle zone: far from the low levels that clearly signaled a bear market, but not conclusively blossoming into a new bull market, either. |
| “You could almost argue that we’re in a bull market and a bear market at the same time,” said Eddie Perkin, the chief equity investment officer at Eaton Vance, a Boston-based money manager. | “You could almost argue that we’re in a bull market and a bear market at the same time,” said Eddie Perkin, the chief equity investment officer at Eaton Vance, a Boston-based money manager. |
| On Monday, the S&P 500 fell 1.8 percent, as investors dumped retail, hospitality and energy shares amid the darkening outlook for economic growth. | On Monday, the S&P 500 fell 1.8 percent, as investors dumped retail, hospitality and energy shares amid the darkening outlook for economic growth. |
| While investors might be tempted to buy stocks now, before the market starts surging higher, many of them are torn. That’s because the recent stock market rally combined with the pandemic has pushed price-to-earnings ratios incredibly high. It’s no overstatement to say the market is the most highly valued it has been in almost two decades, just as the country plummets into what’s expected to be the deepest recession since the Great Depression. | While investors might be tempted to buy stocks now, before the market starts surging higher, many of them are torn. That’s because the recent stock market rally combined with the pandemic has pushed price-to-earnings ratios incredibly high. It’s no overstatement to say the market is the most highly valued it has been in almost two decades, just as the country plummets into what’s expected to be the deepest recession since the Great Depression. |
| Typically, investors calculate a stock’s value by comparing the price of a share with its earnings. The higher the ratio, the more expensive the stock is considered. The calculation can be applied to all 500 companies in the index to assess whether the market as a whole is overvalued or undervalued. | Typically, investors calculate a stock’s value by comparing the price of a share with its earnings. The higher the ratio, the more expensive the stock is considered. The calculation can be applied to all 500 companies in the index to assess whether the market as a whole is overvalued or undervalued. |
| Updated July 7, 2020 | |
| The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization. | |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. | Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| When investors are optimistic about future earnings, they’re more willing to pay higher prices for expected earnings, generating a higher price-to-earnings ratio — sometimes just called the P/E ratio. When they’re pessimistic, they’re less likely to pay a lot for the earnings that have been forecast, in part because they’re skeptical those earnings will be produced. That typically results in a low P/E ratio. | When investors are optimistic about future earnings, they’re more willing to pay higher prices for expected earnings, generating a higher price-to-earnings ratio — sometimes just called the P/E ratio. When they’re pessimistic, they’re less likely to pay a lot for the earnings that have been forecast, in part because they’re skeptical those earnings will be produced. That typically results in a low P/E ratio. |
| When the market collapsed last month, the P/E ratio plummeted. But it began rising in recent weeks, and could climb further if the market merely remains steady. | When the market collapsed last month, the P/E ratio plummeted. But it began rising in recent weeks, and could climb further if the market merely remains steady. |
| The reason: Public companies are beginning to report their first-quarter results. Many will report drastically reduced earnings, with profit expectations for the rest of the year looking grim. | The reason: Public companies are beginning to report their first-quarter results. Many will report drastically reduced earnings, with profit expectations for the rest of the year looking grim. |
| At the end of March, analysts were expecting earnings for S&P 500 companies to be down 10.5 percent in the second quarter, which ends in June. As of Friday, they had updated their expectations and now think profits will fall more than 25 percent, according to FactSet data. | At the end of March, analysts were expecting earnings for S&P 500 companies to be down 10.5 percent in the second quarter, which ends in June. As of Friday, they had updated their expectations and now think profits will fall more than 25 percent, according to FactSet data. |
| With earnings shrinking and stock prices generally stable, the ratio between the two will rise, making stocks look more expensive and potentially making the market rally more precarious. (Highly valued markets often suffer some of the most violent pullbacks.) | With earnings shrinking and stock prices generally stable, the ratio between the two will rise, making stocks look more expensive and potentially making the market rally more precarious. (Highly valued markets often suffer some of the most violent pullbacks.) |
| That leaves investors in a state of limbo, watching a rally that is difficult to make sense of because of how bleak the future looks. | That leaves investors in a state of limbo, watching a rally that is difficult to make sense of because of how bleak the future looks. |
| In other words, while the market is making money, it is churning out a lot of confusion, too. | In other words, while the market is making money, it is churning out a lot of confusion, too. |