Stocks rebound as investors weigh coronavirus economic toll

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US stocks rebounded from an early selloff Thursday as investors assessed how long it will take for the economy to recover from the coronavirus.

The Dow Jones industrial average dropped as much as 458.35 points, or 1.9 percent, to 22,789.62, following its 500-point tumble on Wednesday. But rallying financial stocks helped the blue-chip index claw back the loss and rise 0.7 percent, or 168.93 points, to 23,416.90, as of 1:20 p.m.

The S&P 500 similarly fell as much as 1.8 percent in early trading before climbing 0.3 percent into the green. And the tech-heavy Nasdaq pared an early 1.7 percent loss to just 0.1 percent as of 1:22 p.m.

“The market has entered what we call stall speed as an epic battle ensues between bullish and bearish investors,” said Andrew Smith, chief investment strategist at Delos Capital Advisors.

Wall Street put the brakes on its recent rally this week as several headlines threw cold water on hopes for a speedy recovery from the pandemic-induced economic shutdown. They included Federal Reserve chairman Jerome Powell’s grim Wednesday warning that the virus could leave the US economy with lasting scars.

“There’s obviously a lot of pessimism about how the numbers are going to come out, or how the numbers are looking,” said Lamar Villere, portfolio manager of the Villere Balanced Fund. “Valuations seem like they’re pretty stretched based on how bad the economic data is looking, so it’s hard to be too excited about pouring money into equities at these levels.”

But several US states have started to emerge from lockdowns that have forced businesses to close and put millions of people out of work. Those reopenings will eventually brighten up economic reports that have been filled with doom and gloom for weeks, according to Jim Paulsen, chief investment strategist at the Leuthold Group.

“Four weeks from now or beyond I think we’re gonna start seeing the data get better, and it’s simply because more and more states are bringing more and more parts of their economy back,” Paulsen said.

The recovery in stocks came alongside a jump in oil prices, with West Texas Intermediate crude futures up about 6 percent, at $26.80 a barrel, as of 1:15 p.m.

The oil market has been helped by reopenings in the US as well as plans for future cuts in global production, according Quincy Krosby, chief market strategist for Prudential Financial.

“The more that Americans are going back to work, the more gasoline usage is beginning to pick up,” Krosby said.

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