The S&P 500 was up 3.5%, on track for its best day since early April. The gains erased all of its losses from last week, when the index posted its worst performance since late March and its third weekly loss in the last four.
The Toronto Stock Exchange has been closed for the Victoria Day holiday.
But it wasn’t just the US stocks that went up. Bond yields generally increased, a sign of positive sentiment among investors.
Stocks were already heading towards a higher opening on Wall Street when a pharmaceutical company announced encouraging results in very early testing of an experimental remedy for coronaviruses. The company’s capital, Massachusetts-based Moderna jumped 21.1%.
Investors were also encouraged by remarks made over the weekend by Federal Reserve Chairman Jerome Powell, who expressed optimism that the US economy may recover in the second half. Once the epidemic is brought under control, he said, the economy should be able to “bounce back”.
The Dow Jones Industrial Average gained 963 points, or 4.1%, to 24,649. The Nasdaq composite climbed 2.7%. Small business stocks held up better than the rest of the market. The Russell 2000 index increased 5.8%.
Investors hope that an effective vaccine for COVID-19 can be developed, as it could reassure people and businesses to ensure the successful reopening of the economy.
“The question of how quickly people return, or will they return to the way they did things, is very different if you have a vaccine,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors .
Traders are also encouraged that, so far at least, there has not been much data implying that the reopening of the economy will result in a resurgence in the number of COVID-19 cases, said Sam Stovall, Chief Investment Strategist at CFRA.
“Of course, because we respond to impressions, we could end up giving back some of these gains if additional information challenged our beliefs,” he said.
Technology and finance represented a large share of the overall gains, as did health care companies and industrial companies. Energy inventories rose as the price of US crude oil soared, hitting above $ 30 a barrel for the first time in two months, as cuts in oil production hit at the same time as demand is increasing as the United States and other countries relax some of the restrictions to stop the spread of the outbreak.
US benchmark crude oil for June delivery jumped 8.1% to $ 31.82 a barrel. July Crude oil Brent, the international standard, jumped 7.1% to $ 34.81 a barrel.
Bond yields increased, another sign that pessimism was decreasing. The yield on the 10-year Treasury bill, a benchmark for interest rates on many consumer loans, fell to 0.73% from 0.64% on Friday evening.
Fears of an overwhelming recession from the coronavirus propelled the S&P 500 into a skid of more than 30% from its February peak. Hopes of a relatively quick rebound and unprecedented Federal Reserve and Congressional measures to stem economic pain fueled an historic rebound in stocks in April.
May had an unfavorable start as investors balance cautious optimism for a recovery as economies around the world slowly reopen fears that movements could lead to yet another increase in coronavirus infections and more economic uncertainty. But Monday’s solid start to the week has reversed all market losses so far this month.
“We had an advance of almost 30% between the trough of March 23 and April 17, then we basically trod the water for a month while investors expected a new test of the previous trough, which n ‘Obviously didn’t happen,’ said Stovall. “Usually the markets have to catch their breath after a higher sprint. “
Wall Street hopes that the reopening of businesses and the relaxation of home stay mandates will continue without major setbacks, paving the way for the recovery of corporate profits.
Europe has taken steps to reopen its economy more widely, and so far, new infections and deaths have slowed considerably across the continent. Some countries started easing closures a month ago and even the most severe closings – like those in Italy and Spain – have eased considerably.
In his interview with “60 minutes” from CBS, Powell said the US economy was fundamentally healthy before the virus resulted in widespread business closings and tens of millions of layoffs. He noted that a full recovery is unlikely to be possible before a vaccine arrives.
Before the trade opened, Moderna said its experimental vaccine had shown encouraging results in the first tests, triggering expected immune responses in eight healthy middle-aged volunteers. The vaccine generated antibodies similar to those seen in people who recovered from COVID-19 in study volunteers who received a low or medium dose.
Around the world, a dozen vaccine candidates are in the early stages of testing or are approaching it. Health officials have said that if all goes well, studies on a potential vaccine could end very late this year or early next year.
European markets also posted solid gains on Monday. London’s FTSE 100 rose 4.3% and the DAX in Frankfurt rose 5.7%. The French CAC 40 increased by 5.2%. The Asian markets ended up generally.