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The Bad News Won’t Stop, but Markets Keep Rising The Bad News Won’t Stop, but Markets Keep Rising
(32 minutes later)
The government said on Wednesday that the U.S. economy had suffered its worst contraction since the last recession. The head of the Federal Reserve later said he didn’t know how bad this downturn would be, or how long it would last.The government said on Wednesday that the U.S. economy had suffered its worst contraction since the last recession. The head of the Federal Reserve later said he didn’t know how bad this downturn would be, or how long it would last.
Yet by the end of the day, the S&P 500 stock index had risen 2.7 percent.Yet by the end of the day, the S&P 500 stock index had risen 2.7 percent.
That’s been the pattern lately. The drumbeat of grim news — one million known coronavirus cases in the United States, businesses are collapsing, the unemployment rate could reach 16 percent — has done little to deter stocks’ upward march.That’s been the pattern lately. The drumbeat of grim news — one million known coronavirus cases in the United States, businesses are collapsing, the unemployment rate could reach 16 percent — has done little to deter stocks’ upward march.
Since March 23, when the Federal Reserve announced plans to make unlimited purchases of financial assets to prop up Wall Street, the S&P 500 has soared by more than 31 percent. The unlikely rally created more than $5 trillion of stock market wealth, allowing investors to reclaim more than half of their losses from a steep sell-off earlier this year, in the early days of the pandemic.Since March 23, when the Federal Reserve announced plans to make unlimited purchases of financial assets to prop up Wall Street, the S&P 500 has soared by more than 31 percent. The unlikely rally created more than $5 trillion of stock market wealth, allowing investors to reclaim more than half of their losses from a steep sell-off earlier this year, in the early days of the pandemic.
Why are stocks climbing when news about the economy isn’t getting much better, and the severity of the public health crisis has barely abated? There are two main reasons: First, trillions of dollars of stimulus money from the Fed and Congress come with an implicit guarantee that the government will limit investors’ risk no matter how bad it gets. Second, the periodic glimmer of positive news fuels investors’ optimism that things can only get better.Why are stocks climbing when news about the economy isn’t getting much better, and the severity of the public health crisis has barely abated? There are two main reasons: First, trillions of dollars of stimulus money from the Fed and Congress come with an implicit guarantee that the government will limit investors’ risk no matter how bad it gets. Second, the periodic glimmer of positive news fuels investors’ optimism that things can only get better.
Wednesday delivered on both fronts, after officials said that an antiviral drug made by Gilead Sciences showed promise in treating Covid-19, the disease caused by the coronavirus. Also, the Federal Reserve said it would hold interest rates near zero and continue to do everything it could to stabilize the economy.Wednesday delivered on both fronts, after officials said that an antiviral drug made by Gilead Sciences showed promise in treating Covid-19, the disease caused by the coronavirus. Also, the Federal Reserve said it would hold interest rates near zero and continue to do everything it could to stabilize the economy.
“What the market is rallying on is the expectation that whatever the world looks like nine or 12 months down the road, it’s going to look better than it does now,” said Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman.“What the market is rallying on is the expectation that whatever the world looks like nine or 12 months down the road, it’s going to look better than it does now,” said Scott Clemons, chief investment strategist for private banking at Brown Brothers Harriman.
“On any given day the market might latch onto a particular piece of good information,” Mr. Clemons added. “Today it’s the Gilead press release and the market focused on that. But tomorrow’s another day.”“On any given day the market might latch onto a particular piece of good information,” Mr. Clemons added. “Today it’s the Gilead press release and the market focused on that. But tomorrow’s another day.”
The direction of the stock market is always determined by a complicated mix of hard data and investor psychology. The price of a stock is based on how much money investors think a company can make in the future. So investors care less about the actual facts reflected in today’s headlines, and more about what kind of picture those facts paint about the coming year.The direction of the stock market is always determined by a complicated mix of hard data and investor psychology. The price of a stock is based on how much money investors think a company can make in the future. So investors care less about the actual facts reflected in today’s headlines, and more about what kind of picture those facts paint about the coming year.
To investors, it’s abundantly clear that the American economy is already in a deep recession. More than 20 million jobs have been wiped out in little more than a month. Corporate profits are widely expected to collapse.To investors, it’s abundantly clear that the American economy is already in a deep recession. More than 20 million jobs have been wiped out in little more than a month. Corporate profits are widely expected to collapse.
So when fresh economic reports emerge, such as Wednesday’s announcement from the Commerce Department that first-quarter gross domestic product fell at a 4.8 percent annual rate, they provide little new information to investors.So when fresh economic reports emerge, such as Wednesday’s announcement from the Commerce Department that first-quarter gross domestic product fell at a 4.8 percent annual rate, they provide little new information to investors.
“The market has mostly written off 2020,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “What they’re looking for is for the recovery to start.”“The market has mostly written off 2020,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “What they’re looking for is for the recovery to start.”
Over the last month investors have latched on to a series of indications that the worst-case scenarios for the economy could be mitigated.Over the last month investors have latched on to a series of indications that the worst-case scenarios for the economy could be mitigated.
The federal government has acted quickly, with the passage of a roughly $2 trillion stimulus bill, the largest ever economic rescue legislation, in late March. Markets have also been given a lift by the Fed, which has pumped more than $2 trillion into financial markets.The federal government has acted quickly, with the passage of a roughly $2 trillion stimulus bill, the largest ever economic rescue legislation, in late March. Markets have also been given a lift by the Fed, which has pumped more than $2 trillion into financial markets.
“Stimulus has been the engine that has stabilized and driven asset prices higher,” said Julian Emanuel, chief equity and derivatives strategist at the brokerage firm BTIG.“Stimulus has been the engine that has stabilized and driven asset prices higher,” said Julian Emanuel, chief equity and derivatives strategist at the brokerage firm BTIG.
Another slug of positive news that investors are factoring in comes from the health data. The pace of new infections has slowed sharply as lockdowns continue around the country. Some states, such as Tennessee, Georgia and South Carolina, are beginning to open up and others, including New York and California, are laying out their criteria for doing so.Another slug of positive news that investors are factoring in comes from the health data. The pace of new infections has slowed sharply as lockdowns continue around the country. Some states, such as Tennessee, Georgia and South Carolina, are beginning to open up and others, including New York and California, are laying out their criteria for doing so.
Updated June 1, 2020 Updated June 2, 2020
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
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.
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.
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.)
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
Yes, but make sure you keep six feet of distance between you and people who don’t live in your home. Even if you just hang out in a park, rather than go for a jog or a walk, getting some fresh air, and hopefully sunshine, is a good idea.
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
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.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.
Other updates, such as Wednesday’s hopeful statements on the potential of Gilead’s remdesivir drug, have reinforced the narrative that things are improving. Shares of Gilead rose 5.7 percent after the company said it was “aware of positive data” from a federal trial of its experimental coronavirus drug. Already, speculative bits of news about the drug’s potential had twice lifted the market in recent weeks.Other updates, such as Wednesday’s hopeful statements on the potential of Gilead’s remdesivir drug, have reinforced the narrative that things are improving. Shares of Gilead rose 5.7 percent after the company said it was “aware of positive data” from a federal trial of its experimental coronavirus drug. Already, speculative bits of news about the drug’s potential had twice lifted the market in recent weeks.
Later in the day, the National Institute of Allergy and Infectious Diseases issued a statement saying its study of the drug showed that it sped up recovery in hospitalized patients with advanced Covid-19.Later in the day, the National Institute of Allergy and Infectious Diseases issued a statement saying its study of the drug showed that it sped up recovery in hospitalized patients with advanced Covid-19.
“The evidence is continuing to mount that remdesivir is having a true treatment effect,” said Dr. Brian Abrahams, co-head of biotechnology equity research at RBC Capital Markets in New York. Dr. Abrahams stressed, however, that it remained unclear what the magnitude of that benefit would be to patients.“The evidence is continuing to mount that remdesivir is having a true treatment effect,” said Dr. Brian Abrahams, co-head of biotechnology equity research at RBC Capital Markets in New York. Dr. Abrahams stressed, however, that it remained unclear what the magnitude of that benefit would be to patients.
It was clear on Wednesday that investors extrapolated this shred of good news into a brighter outlook for the economy. The Russell 2000 index of small capitalization stocks soared nearly 5 percent. Such smaller stocks tend to be less globally diversified than larger companies, meaning they’re more reliant on the U.S. domestic economy.It was clear on Wednesday that investors extrapolated this shred of good news into a brighter outlook for the economy. The Russell 2000 index of small capitalization stocks soared nearly 5 percent. Such smaller stocks tend to be less globally diversified than larger companies, meaning they’re more reliant on the U.S. domestic economy.
Some of the biggest jumps were in parts of the market that have been hardest hit by the virus. Norwegian Cruise Line Holdings rose more than 20 percent. Royal Caribbean and Carnival also rose more than 15 percent each. The energy giants Exxon Mobil and Chevron — hard hit by the 70 percent collapse in crude prices this year — were both up more than 5 percent.Some of the biggest jumps were in parts of the market that have been hardest hit by the virus. Norwegian Cruise Line Holdings rose more than 20 percent. Royal Caribbean and Carnival also rose more than 15 percent each. The energy giants Exxon Mobil and Chevron — hard hit by the 70 percent collapse in crude prices this year — were both up more than 5 percent.
Technology giants also climbed after Alphabet, Google’s parent company, reported better-than-expected sales results after the close of trading on Tuesday. Since Microsoft, Apple, Amazon, Facebook and Alphabet are among the most highly valued companies in the United States, their heft gives them outsize sway in market-cap-weighted stock market indexes such as the S&P 500.Technology giants also climbed after Alphabet, Google’s parent company, reported better-than-expected sales results after the close of trading on Tuesday. Since Microsoft, Apple, Amazon, Facebook and Alphabet are among the most highly valued companies in the United States, their heft gives them outsize sway in market-cap-weighted stock market indexes such as the S&P 500.
“A lot of it really is about hope,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, an investment company. “You’re getting little hints of hope.”“A lot of it really is about hope,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, an investment company. “You’re getting little hints of hope.”