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US stocks climbed Tuesday as Wall Street once again grew optimistic about the path of coronavirus crisis while grappling with grim earnings reports from major companies.
The Dow Jones industrial average jumped as many as 649.81 points, or 2.7 percent, following a 1.4 percent drop Monday. The S&P 500 posted a gain as large as 2.9 percent, while the tech-heavy Nasdaq rose as much as 3.4 percent.
The rally came after governors in several US states said they would form plans to reopen their economies once the virus dies down. Those included New York, where Gov. Andrew Cuomo said “the worst is over” if the state keeps up restrictions to curb the virus.
“This phase we’re in now is easing the restrictions, trying to get the economy — albeit on a very slow path — to begin to open,” said Quincy Krosby, chief market strategist for Prudential Financial.
“The focus in the market is on this next phase,” she added.
Investors also got good news from abroad. New data showed exports and imports shrinking less than expected in March following the outbreak there. And European countries such as Spain and Austria have let some businesses return to work after tough lockdowns.
Investors will gauge the safety of restarting the economy by seeing whether countries see second waves of infections after loosening restrictions, according to Krosby.
“No doubt, the coming weeks will continue to be deeply troubling for many of these countries but if we are now positioned in the latter part of the bell curve, we can start to imagine life after the lockdown which is what investors have craved for weeks,” Craig Erlam, senior currency analyst at OANDA, said in a commentary.
Wall Street also digested mixed first-quarter results from JPMorgan Chase, Wells Fargo and Johnson & Johnson, which kicked off the corporate earnings season on Tuesday.
Shares in JPMorgan and Wells Fargo posted early gains but tumbled after the banks revealed their profits plunged as they squirreled away billions of dollars to weather the coronavirus storm. JPMorgan shares were off 3.6 percent at $94.60 as of 11:54 a.m. while Wells Fargo’s were recently down 4.3 percent at $30.08.
“The banks are just kind of guessing at what their earnings really are when they take reserves for potential future loan losses,” said Eric Marshall, director of research at Hodges Capital Management. “I think the reality of the unknown may have set in with investors this morning.”
Pharmaceutical giant Johnson & Johnson’s shares climbed 4 percent at the open after it posted expectation-beating profits but cut its forecast for the year because of the coronavirus crisis. The stock was recently up 4.2 percent at $145.65.
As more companies drop earnings reports in the coming weeks, investors will look to balance sheets more than profits and losses to size up how well equipped firms are to get through the pandemic, according to Marshall.
“The big question will be what type of visibility that companies have into their business and what kind of liquidity they have on the balance sheet to make it through whatever disruptions have occurred,” he said.
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