US stocks close higher, but are still deep in the hole

Wall Street did not exactly get what it wanted on Thursday, but maybe it got what it needed – a break from the relentless coronavirus fear-fuelled selloffs of late.

Things were looking dicey for the Dow Jones Industrial Average at the start of trading. It opened lower and fell as much as 721 points before it bounced back up to settle into choppy trading. By the closing bell, the 30-share index added 188 points to the plus side, or just shy of one percent, at 20,087.

A welcome gain, for sure. But to put it in perspective, on Wednesday, the Dow closed at its lowest level since February 2017. And the index is still on track for its worst week since the 2008 financial crisis.

The S&P 500 index also fell at the open, but managed to close up 0.47 percent. Again, any positive finish is a plus, but the index – a barometer for United States retirement and college savings accounts – is still nearly 30 percent off of its record high.

The standout of the three major indexes was the Nasdaq Composite Index, which closed up 2.3 percent.

Shares of Uber Technologies soared 38 percent after the company’s CEO said the firm has a $10bn war chest to ride out the coronavirus crisis. 

Energy stocks were strong performers on the day as oil prices reversed Wednesday’s brutal rout.

US benchmark West Texas Intermediate (WTI) crude soared 24 percent on Thursday – its biggest one-day gain ever – to trade around $25 a barrel. But that rebound was on the heels of three straight days of selling, including Wednesday’s 24 percent plunge that took WTI to an 18-year low.

Wall Street has been in the throes of one of the most volatile periods in its history as investors, policymakers, analysts and economists try to assess how big and how deep a hit coronavirus will deliver to the US economy.

On Thursday, economists at Bank of America declared that the economy has “fallen into recession”. Other analysts are forecasting one quarter of negative growth, and a bounce-back in the second half of the year – but with strong caveats. 

A recession is defined as two quarters or six consecutive months of economic contraction.

Data released on Thursday showed the labour market is already taking a hit over coronavirus. The number of Americans filing for unemployment benefits surged to a two-and-a-half-year high last week as service-oriented companies scaled back operations and furloughed workers.

Thursday’s more positive trading aside, investors have been dumping assets across the board to get their hands on cash to cover positions. Businesses have also been scrambling and tapping credit lines to make sure they have sufficient cash reserves to deal with coronavirus fallout. 

As the stress on credit markets has grown, the US Federal Reserve has thrown open its crisis-era toolbox and unleashed all sorts of emergency measures to shore up the economy and unclog the domestic and global financial plumbing.

Other central banks around the world have also deployed extraordinary measures.

Fiscal measures from Washington are also ramping up. On Thursday, US President Donald Trump signed into a law a $100bn coronavirus aid bill that extends paid sick leave to more workers, enhances unemployment benefits, makes coronavirus testing free to all who need it, and scales up food aid for the poor.

The White House and lawmakers in Congress are also hashing out what could be a $1 trillion dollar stimulus package to help households – as well as businesses great and small that are foundering financially due to coronavirus disruptions. 

Among the measures being discussed are taxpayer-funded bailouts for certain businesses and sectors of the US economy.

Many are calling for government rescue packages to come with strings attached, such as preventing corporations from using bailout money to buy back shares – which enriches shareholders and executives who receive stock as part of their compensation packages.

On Thursday, Trump said he would be “OK” if the stimulus bill under discussion bans firms that receive bailouts from using government funds to buy back their own stock or pay executive bonuses.