S&P 500 Caps Best Week Since 1974 After Fed Acts: Markets Wrap

Shares in Tokyo dipped and were higher in Sydney and Seoul.

12 Apr 2020, 08:33 PM IST

S&P 500 Caps Best Week Since 1974 After Fed Acts: Markets Wrap

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

(Bloomberg) -- U.S. stocks posted the biggest weekly gain since 1974 as investors looked past staggering jobless numbers when the Federal Reserve released new measures to cushion the fallout from the coronavirus. Oil fell as investors saw a supply-curb proposal as insufficient.

The S&P 500 Index rallied for the third time in four days, bringing this week’s increase to 12%. The Fed announced another series of sweeping steps to provide as much as $2.3 trillion in additional aid just as data showed the number of claims for unemployment benefits surged for a third week. Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases, said U.S. fatalities from Covid-19 may be far fewer than earlier projections.

“The Fed news is really bullish (along with global fiscal news) if we have confidence on ways to deal with the Covid bounce-back and ultimate vaccine solution,” said Dennis DeBusschere, head of portfolio strategy at Evercore ISI. “So positive outcomes on that front lead to fair value estimates going up, improving the risk reward from this level.”

Oil slipped, reversing earlier gains, as investors saw OPEC+ supply-curb proposal as insufficient to offset estimates for demand destruction from the Covid-19 outbreak. The producer group, which includes Saudi Arabia and Russia, is set to cut 10 million barrels a day of its oil output for two months.

Fed Chairman Jerome Powell reiterated that the U.S. central bank was committed to using all its powers to help the country recover.

The Fed will wade into the municipal-bond market to an unprecedented degree, can now purchase “fallen angel” bonds from companies that have recently lost their investment-grade ratings, and has expanded its Term Asset-Backed Securities Loan Facility to include top-rated commercial mortgage-backed securities and collateralized loan obligations.

The surprise pledge from the Fed to buy recently downgraded corporate bonds boosted some of the biggest ETFs tracking the securities. The $14.8 billion iShares iBoxx High Yield Corporate Bond ETF surged the most since January 2009.

Gold closed at the highest since late 2012 as investors sought insurance against the possibility of further economic slowing.

Elsewhere, the Stoxx Europe 600 Index rose. Government bonds in the region gained amid reports that Italy, Spain and the U.K. may extend lockdowns to combat the coronavirus outbreak. Most Asian stocks rose, though Japanese shares retreated.

These are some of the main moves in markets:

Stocks

The S&P 500 Index rose 1.4% to 2,789.82 as of 4:04 p.m. New York time, the highest in almost four weeks.

The Dow Jones Industrial Average gained 1.2% to 23,719.37, the highest in almost four weeks.

The Nasdaq Composite Index increased 0.8% to 8,153.57, the highest in almost four weeks.

The MSCI All-Country World Index climbed 1.6% to 469.59, the highest in almost four weeks.

Currencies

The Bloomberg Dollar Spot Index sank 0.8% to 1,247.32.

The Japanese yen strengthened 0.4% to 108.41 per dollar.

The euro gained 0.7% to $1.0934.

The British pound rose 0.7% to $1.2471, the strongest in more than three weeks.

Bonds

The yield on two-year Treasuries dipped three basis points to 0.23%.

The yield on 10-year Treasuries decreased five basis points to 0.72%.

Germany’s 10-year yield declined four basis points to -0.35%, the largest fall in more than a week.

Britain’s 10-year yield declined three basis points to 0.306%.

Commodities

West Texas Intermediate crude fell 6.3% to $23.50 a barrel.

Gold strengthened 2.1% to $1,684.38 an ounce, the highest in more than seven years.