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The Bad News Won’t Stop, but Markets Keep Rising The Bad News Won’t Stop, but Markets Keep Rising
(8 days 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.
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.
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.
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.
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.
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 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.
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.
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.”