Stocks surged Tuesday as hopes built for a coronavirus vaccine and economic activity picked up from historic lows as all 50 states begin allowing shuttered businesses to reopen.
The Standard & Poor’s 500 index crossed 3,000 for the first time since March 5.
Novavax announced the launch of human trials for its COVID-19 vaccine, expecting initial results in July. Merck said Tuesday it plans to work with nonprofit research organizations to develop a vaccine.
The news follows announcements of several other potential vaccines.
“We don’t have just a couple of them in the pipeline,” says Ryan Detrick, senior market strategist at LPL Financial. “We’ve got a lot of shots that are out there.”
In midday trading, the Dow Jones Industrial Average was up about 660 points, or 2.7%, to 25,128. The S&P 500 index rose 58 points, or nearly 2%, to 3,013. The tech-heavy Nasdaq jumped about 1% to 9, 421.
The post-Memorial Day rally followed a strong rise in global markets as more nations push to open their economies. The S&P 500 came off a solid week and is on track for a second straight month of gains. The index remains down 11.2% from its all-time high in February.
Bond yields were broadly higher in another sign of optimism. The yield on the 10-year Treasury note, a benchmark for interest rates on many consumer loans, rose to 0.69% from 0.66% late Friday.
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Oil prices rose. Benchmark U.S. crude oil was up 3.5% to $34.41 a barrel. Brent crude oil, the international standard, was up 1.5% to $36.66 a barrel.
Economic data Tuesday spotlighted glimmers of a rebound. Consumer confidence rose this month on an improvement in Americans’ short-term outlook, though it remained near six-year lows, the Conference Board said. New home sales rose more sharply than expected in April.
There are early signs of at least a modest uptick in travel. The number of travelers passing through Transportation Security Administration checkpoints topped 340,000 on Memorial Day, well below 2.5 million a year ago but above the 87,000 bottom in mid-April. Hotel occupancy reached 32% the week ending May 16, 54% below the year-ago figure but above 21% the week ending April 11.
“It’s optimism that the economy is coming back online faster than many people thought,” Detrick says.
All the states have begun gradual, phased reopenings of their economies. Despite mixed effects on the number of coronavirus cases and reports of Americans ignoring social distancing protocols on crowded beaches over the weekend, national daily counts of deaths and hospitalizations generally have trended down, Detrick noted.
Yet with the S&P 500 about 35% above its March 23 low, some analysts worry about a market that reflects far more optimism than seems warranted by economic data and corporate profits that could fall about 30% this year. S&P 500 shares are trading at 20.5 times projected earnings over the next 12 months, the largest multiple since the early 2000s, according to LPL.
The economy is still reeling amid the worst recession in modern history. Though a rebound is likely in the second half of the year, unemployment is forecast to close out 2020 at about 10% and remain elevated through next year.
Still, Detrick says, “the stock market is forward-looking. There could be a much better economy six to nine months from now.”
Fears of a crushing recession due to the coronavirus sent the S&P 500 into a skid of more than 30% from its February high. Hopes for a relatively quick rebound and unprecedented moves by the Federal Reserve and Congress to stem the economic pain drove a historic rebound for stocks in April and bolstered optimism that the market won’t return to the depths seen in March.
Reassuring comments by the head of China’s central bank helped spur buying in global markets Tuesday. France’s CAC 40 was up 1.4% as the government was due to unveil support for the auto industry. Germany’s DAX gained 0.9%, and the FTSE 100 in Britain, which was closed Monday, rose 1%. Asian markets closed higher.
In another confidence-boosting development on Wall Street, the New York Stock Exchange reopened its trading floor Tuesday for the first time since mid-March, when it closed during the coronavirus outbreak.
New York Gov. Andrew Cuomo rang the opening bell at the NYSE, which allowed a limited number of traders back to the floor. They were required to adhere to social distancing guidelines and wear masks.
Contributing: The Associated Press
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