Wall Street Caps Best Week Since 1974  04/09 16:16

   Wall Street closed out its best week in 45 years on Thursday after the 
Federal Reserve launched its latest titanic effort to support the economy 
through the coronavirus outbreak.

   NEW YORK (AP) -- Wall Street closed out its best week in 45 years on 
Thursday after the Federal Reserve launched its latest titanic effort to 
support the economy through the coronavirus outbreak.

   The central bank announced programs to provide up to $2.3 trillion in loans 
to households, local governments and businesses as the country tips into what 
economists say may be the worst recession in decades. It's the latest 
unprecedented move by the Fed, which has rushed to ensure cash gets to parts of 
the economy that need it after markets got snarled by a rush of investors 
pulling cash out of the system.

   The stock market is not the economy, and that distinction has become even 
more clear this week. The S&P 500 rose 1.4% Thursday, the same day the 
government announced 6.6 million Americans applied for unemployment benefits 
last week as layoffs sweep the nation. For the week, the S&P 500 jumped 12.1%, 
its best performance since late 1974. Markets will be closed for Good Friday.

   Stock investors are continuously looking ahead to where the economy will be 
a few months or more in the future. From mid-February through late March, they 
sent stocks down by a third on expectations that a steep recession was 
imminent, before the economy really began to crunch.

   In the last few weeks, though, investors have sent the market back up nearly 
25% following promises for massive aid from the Fed, other central banks and 
governments around the world, even as evidence piles up that the recession 
fears were prescient. This week, some investors have begun to look ahead to the 
economy possibly reopening amid signs the outbreak may be peaking or plateauing 
in several of the world's hardest hit areas.

   "The market is solely focused on the number of cases," said Quincy Krosby, 
chief market strategist at Prudential Financial. "The question is when can the 
restrictions be lifted? That's what the market is focused on, when does America 
open up for business again?"

   The S&P 500 rose 39.84 points to 2,789.92. The Dow Jones Industrial Average 
added 285.80, or 1.2%, to 23,719.37, and the Nasdaq climbed 62.67, or 0.8%, to 
8,153.58..

   Many professional investors have been skeptical of the rally, saying there 
is still too much uncertainty. They say predictions for a relatively quick 
economic rebound are overly optimistic, and the head of the International 
Monetary Fund said Thursday the global economy is set for its deepest recession 
since the Great Depression..

   While hopes are building that a plateau may be arriving for infections in 
several hotspots, it's not assured. In the meantime, businesses continue to 
shut down and one in 10 U.S. workers has lost their jobs in the last three 
weeks.

   "You typically have very strong rebounds, even in a bear market," Krosby 
said of markets where stocks have fallen more than 20%. "The question is 
whether or not we see selling into this rebound, or can we continue to build on 
it."

   The market's big gains this week have been somewhat tentative. On Tuesday, 
the S&P 500 charged to an early 3.5% gain before it disappeared in the final 
minutes of trading. On Thursday, the index nearly gave up all of an early 2.5% 
gain, paring it down to 0.5% before climbing again in the last hour of trading.

   Such volatility has become routine in markets at the end of each week 
recently. 

   "People are a little nervous to hold risk going into the weekend, especially 
a 72-hour weekend," said J.J. Kinahan, chief strategist with TD Ameritrade.

   The afternoon's fade also coincided with another abrupt downdraft in the 
price of oil. Benchmark U.S. crude oil fell $2.33, or 9.3%, to settle at $22.76 
per barrel after investors learned that Russia and members of OPEC had reached 
a preliminary agreement to reduce production by 10 million barrels a day --- 
far short of what would be needed to offset the steep decline in demand because 
of the coronavirus shutdowns, said Dave Ernsberger, global head of commodities 
pricing at S&P Global Platts.

   "What this was is a case of spectacular disappointment," Ernsberger said. 
"In the oil market today, 20 million barrels of oil demand just got blown off 
the face of the Earth by the coronavirus. It's gone, and they can't even begin 
to paper over that with what they agreed on today."

   Brent crude fell $1.36, or 4.1%, to $31.48 per barrel. 

   The Fed's immense programs announced Thursday touch far-reaching corners of 
lending markets, and if they continue for the long term, they could eventually 
lead to market bubbles.

   But in the short term, "what the Fed is doing is great and helping markets 
function and providing liquidity so investors can do what they need (and) want 
to do," said Warren Pierson, deputy chief investment officer at Baird Advisors.

   The programs even include bonds for companies that have weak enough credit 
ratings to be called "junk," or speculative grade.

   Worries have been high about the ballooning amount of corporate debt 
concentrated at the bottom edge of high-quality "investment grade." The looming 
recession could push a lot of that into "junk" status, which would force many 
investors to sell it because they're required to hold only investment-grade 
bonds. A run from such bonds could trigger sell-offs in other areas of the 
market and lead to even more pain across the economy.

   Also in the Fed's programs are municipal bonds, which allow cities and state 
governments to raise cash. On a normal day, trading in the market might see 15 
buyers make a bid for a particular bond. But as recently as a few weeks ago, 
there were 15 sellers for every buyer, according to Gabe Diederich, portfolio 
manager at Wells Fargo Asset Management.

   All the difficulty in selling caused prices to tumble more than they 
otherwise should, even for high-quality bonds. That makes it more difficult for 
local governments to borrow. 


(CZ)