Stocks surge on signs new coronavirus deaths could be slowing
Stocks jumped on Monday on investor hopes that infection and death rates from the coronavirus are slowing in parts of the U.S. and in Europe.
New coronavirus infections and deaths are showing signs of slowing in Italy and Spain. The center of the U.S. outbreak, New York, also reported the number of daily deaths has been effectively flat for two days.
That was enough to launch stocks higher despite the U.S. still bracing for a surge of fatalities due to COVID-19. New York Gov. Andrew Cuomo said restrictions should stay in place to slow its spread.
The S&P 500-stock index rose 175 points, or 7%, to close at 2,664, while the Dow surged 1,627 points, or nearly 8%, to 22,680. The tech-heavy Nasdaq also gained more than 7%.
"We're running on raw optimism, maybe that's the best way to put it," said Randy Frederick, vice president of trading and derivatives at Schwab Center for Financial Research.
The Federal Reserve also boosted market sentiment by announcing that it would purchase loans that banks make to small businesses under the federal government Paycheck Protection Program.
By purchasing the loans, the central would create an incentive for the banks to engage in more lending. Otherwise, when banks make a loan, they are typically required to hold some cash in reserve in the case of default.
Investors have been waiting anxiously for a glimmer of hope that the rate of new infections may hit its peak, which would give some clarity about how long the upcoming recession will last and how deep it will be.
Without signs of a slowdown in the virus, markets have been guessing about how long businesses will remain shut down, companies will lay off workers and flights remain canceled due to measures meant to slow the speed of the outbreak.
"The virus is not everything, it's the only thing, and nothing else really matters" to the markets, Frederick said, particularly in a week that is relatively light on economic reports.