Major US stocks close out best week since 1974 after Fed acts again

A new Federal Reserve intervention lifted US stocks to end another week of messy trading up more than 12 per cent.

A few people walk on Wall Street in front of the New York Stock Exchange in New York. Picture: AP

US stocks soared on Thursday to post their biggest week of gains since 1974, extending a remarkable rally despite evidence of increasing economic strain due to the coronavirus pandemic.

Markets charged higher much of the past week, helping shares of everything from banks to manufacturers to hotel operators chip away at their losses.

The S&P 500 added 39.84 points, or 1.4 per cent, to 2789.82 on Thursday and gained 12 per cent for the week – capping off its biggest week of gains in decades. The Dow Jones Industrial Average jumped 285.80 points, or 1.2 per cent, to 23719.37 and rose 13 per cent for the week, while the Nasdaq Composite advanced 62.67 points, or 0.8 per cent, to 8153.58 and added 11 per cent for the week.

The frenzied rally stood in sharp contrast to dim news on the health of the economy. Data released on Thursday showed the number of Americans who applied for unemployment benefits in the first week of April was 6.6 million, as swathes of the US economy shut down because of the coronavirus pandemic. In a report, the Congressional Budget Office said it expected US unemployment to rise by more than 10 per cent in the second quarter, despite politicians recently enacting stimulus measures to try to offset the pain stemming from a nationwide disruption to business.

“There’s a lot of uncertainty at the moment,” said Andrew Hunter, a senior US economist at Capital Economics. “Everyone’s been surprised at the speed and scale of the lay-offs.” One reason analysts have said stocks have proved to be more resilient than expected: central bankers have stepped in to provide unprecedented levels of support for the economy. The Federal Reserve unveiled new programs Thursday to provide $US2.3 trillion in lending, expanding efforts to reach small and midsize businesses, as well as cities and states. The central bank also said it would expand its corporate lending programs to riskier types of debt that had previously been excluded.

Others believe the economy will rebound in the second half of the year, given authorities’ containment measures prove effective in stemming the spread of coronavirus. Nearly 85 per cent of the economists in a Wall Street Journal survey predicted annualised growth rates of 6.2 per cent in the third quarter, followed by 6.6 per cent in the fourth quarter.

In the stock market, some of the sectors that have been hit hardest in the past month were among the biggest gainers.

Banks rallied, with JPMorgan Chase up $US8.46, or 9 per cent, to $US102.76 on Thursday and Goldman Sachs Group up $US7.30, or 4.1 per cent, to $US184.25.

Energy stocks briefly rose, but then ended the day lower after conflicting reports about major producers’ willingness to slash oil production.

US crude for May delivery fell $US2.33, or 9.3 per cent, to $US22.76 a barrel. The S&P 500 energy sector posted losses for the day, the only sector of the S&P 500’s 11 groups to do so.

Meanwhile, the number of coronavirus infections passed 432,000 in the US, with fatalities climbing above 14,800. Countries around the world including Japan and Singapore reported a record number of new cases, prompting discussions about extending the lockdown measures.

The Stoxx Europe 600 finished the week up 7.4 per cent for its best showing since 2011, while in the Asia-Pacific region, Australia’s stock benchmark closed the week 6.3 per cent higher.

Chinese and South Korean equity benchmarks ended the day higher, while Japan’s Nikkei 225 was flat.

“Investors are not putting the risk of a resurgence on the top of their minds right now,” said Eli Lee, head of investment strategy at Bank of Singapore. The risk of a second or subsequent wave of infections would bear watching as this could prolong containment measures, leading to a longer recession than expected, he cautioned.

On Friday, many of the world’s major stock markets, including the US, will be closed Friday for public holidays. Markets in South Korea, mainland China and Japan will remain open for trading.

Dow Jones Newswires