Widespread economic devastation, severe unemployment and a grim prognosis for recovery have not stopped the stock market’s exuberance. And Tuesday, that undying optimism propelled the market to a new high, pushing it past a milestone reached only six months ago, when the coronavirus was just beginning its harrowing journey across the United States.
To those outside Wall Street, the market’s rise may appear inexplicable given the human and economic toll of the virus, and a stalemate in Washington that has paralyzed efforts to provide more relief that many businesses and workers desperately need. Still, investors have cast the nearly relentless drumbeat of bad news aside to focus on any signs that the worst might be over. They have also been emboldened by the Federal Reserve’s steadfast support of the markets and unwavering embrace of low interest rates.
Investors are taking into account the fact that the virus has shown signs of abating, with the number of new cases declining by 16% over the last 14 days, according to data compiled by The New York Times. Expectations for 2020 corporate profits, formulated by Wall Street analysts, seem to have stopped plummeting.
And the economy is improving, even if the recovery is tepid. Some 1.8 million new jobs were added in July, and weekly state unemployment benefit claims have fallen below 1 million for the first time since March.
Together, these data points have been enough to create an outlook that, while not exactly rosy, is at least no longer pallid. At the same time, the improvements are hardly so significant that they would prompt the Federal Reserve to pull back its support for the economy.
Several times in recent days, the S&P 500 had crisscrossed its Feb. 19 closing high of 3,386.15 in intraday trading, before falling below that level to end the trading day. But Tuesday, the blue chip index notched a modest gain of 0.2%, to close at 3,389.78, after another solid performance by major technology companies. Amazon.com rose 4.1%, pulling the Nasdaq composite index to a fresh record as well. The Dow Jones industrial average slipped 0.2%.
Tuesday’s rise was the latest chapter in remarkable rebound for the stock market following a nearly 34% collapse in February and March. It was the fastest-ever nosedive of more than 30% from a peak, reflecting the depths of panic as investors began to consider the economic costs of the pandemic.
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