Sun, Mar 29, 2020 page14

• Hopes on stimulus help Wall Street retain gains

  MURKY WATERS: Traders are preparing for a gloomy earnings reporting season, as profits are likely to fall sharply due to the effects of the COVID-19 pandemic

  • AP
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  Wall Street on Friday closed lower, but still notched big gains for the week as investors held out hope that a US$2 trillion rescue package would cushion businesses and households from the economic devastation being caused by the COVID-19 pandemic.

  The S&P 500 closed 3.4 percent lower, but still climbed 10.3 percent for the week, its biggest gain since March 2009. That followed two weeks of relentless selling.

  The Dow Jones Industrial Average’s 12.8 percent weekly gain was its biggest since 1938, thanks largely to Boeing Co, which climbed 70.5 percent this week.

  

  Stocks had soared over the previous three days as the relief bill moved closer to becoming law. It passed the US House of Representatives on Friday afternoon and US President Donald Trump signed it later in the day.

  The bill includes direct payments to households, aid to hard-hit industries like airlines and support for small businesses.

  Despite the help, analysts expect markets to remain turbulent until the outbreak begins to wane.

  Even after the rally this week, the market is still down 25 percent from the peak it reached a month ago.

  The pandemic has forced widespread shutdowns that have ground much of the US economy to a halt. This week more than 3 million people filed for unemployment benefits, shattering previous records. It was the first of what is sure to be many grim signs of the toll the virus is taking on the US economy.

  “The key at this point is getting a handle on the spread of the virus so that then we can start to think about what [economic] growth looks like for the remainder of the year,” Robert W. Baird & Co investment strategist Willie Delwiche said.

  The push to deliver financial relief is taking on more urgency as the outbreak continues to widen.

  The number of cases in the US has now surpassed those in China and Italy, Johns Hopkins University said.

  Investors have yet to get a clear picture of exactly how badly the crisis has hurt corporate profits, the ultimate driver of stock prices.

  Very few companies have dared to issue forecasts capturing the damage, although traders are girding for discouraging results in the next few weeks as earnings reporting season begins.

  Many companies have simply withdrawn their profit forecasts altogether.

  At the start of this year, analysts expected that S&P 500 companies’ earnings would grow 4.4 percent in the January-to-March quarter.

  They now expect earnings to be down 4.1 percent, FactSet Research Systems Inc said.

  Earnings for airlines, which have been hit by lost bookings as businesses and individuals canceled travel plans to minimize their risk of contracting the virus, are expected to be catastrophically bad.

  Delta Air Lines Inc went from an expected 2.2 percent decline to a 108 percent plunge.

  Even the current forecasts might not yet reflect the size of the potential earnings declines this year, with only 15 percent of analysts having adjusted their estimates within the past couple of weeks, Credit Suisse Group AG said in a report.

  The latest bout of selling on Friday left the S&P 500 down 88.60 points, or 3.4 percent, to 2,541.47.

  The Dow Jones Industrial Average on Friday slid 915.39 points, or 4.1 percent, to 21,636.78.

  The NASDAQ Composite on Friday lost 295.16 points, or 3.8 percent, to 7,502.38, but jumped 9.1 percent from a close of 6,879.52 on March 20.

  The Russell 2000 index of smaller company stocks on Friday fell 48.33 points, or 4.1 percent, to 1,131.99, surging 11.6 percent from 1,013.89 a week earlier.

  Cruise operators Norwegian Cruise Line and Carnival Corp led the decliners in the S&P 500. The industry has been among the hardest hit by the economic fallout from the coronavirus. The companies are down more than 70 percent so far this year.

  The overall downturn in markets over the past several weeks is creating good opportunities for investors to buy into sectors of the market that would be “prevalent” in the next decade, including e-commerce and technology companies that focus on things like gene therapies, UBS Global Wealth Management deputy chief investment officer, Americas Solita Marcelli said.

  The strong rallies this week have prompted some analysts to suggest that the worst of the selling could be over.

  However, most expect stocks to touch on recent lows again until there have been enough sustained gains in the market, and progress in fighting the pandemic, to ease investors’ fear of further declines.

  “The takeaway from this week is the initial down phase has probably run its course,” Delwiche said. “Investors can get out of the duck-and-cover mode and start to figure out what they need to do. It doesn’t mean that we’ve gotten an all-clear signal.”

  Additional reporting by staff writer
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