Stocks Shoot Higher Wednesday: What Wall Street’s Saying

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Stocks rose considerably Wednesday, as optimism on the spread curve of the coronavirus has taken hold. Several questions remain, past the recession the U.S. is likely in. 

All three major U.S. indices rose, with the S&P 500 posting a hefty 3.4% gain. Crude oil rose 11.26%. Investors were net sellers of the safe 10 year treasury bond, with the yield rising to 0.77%. 

News out of China shows that Wuhan is easing its lockdown and thousands ride trains, as the spread of the virus slows down in the country and in the EU. Health experts expect peak case counts in the next few days in New York, the epicenter of the virus. 

Democratic House Speaker Nancy Pelosi has mentioned a $1 trillion stimulus bill may soon be passed, in addition to the current $2 trillion bill already working through the economy. Small businesses and households are struggling and become more illiquid by the day. This gives investors confidence in the government's ability to tide the economy over while all actors await the containment of the virus. 

Senator Bernie Sanders dropped out of the 2020 presidential election, leaving Senator Joe Biden to be the presumptive Democratic nominee. The removal of Sanders from the equation means far less potential regulation on healthcare, sending shares of United Health  (UNH) - Get Report, Cigna  (CI) - Get Report and CVS  (CVS) - Get Report up more than 7%, 5% and 4%, respectively. 

Looking forward, there question now is how long the economic recovery will take, what earnings in 2021 will look like (they’ll fall from previous estimates) and how much market volatility to expect in the short-term. 

Here’s what Wall Street had to say:

Mike Loewengart, Head, Investment Strategy, E*Trade:

"Yesterday marked the deadliest day of the coronavirus outbreak in the US thus far. But markets appear to be weighing the good with the bad. In lieu of real-time economic data, we’re seeing the markets latch onto signs of optimism around the pandemic as major indexes remain in the green and the VIX edges back down. If we are indeed at the inflection point of the curve given Fauci’s recent remarks of hope for a turnaround next week, we may soon have a better idea of the timeline to recovery—at what point and which pockets of the economy will slowly start to turn back on. Try not to let recent bullish momentum foster a false sense of confidence. The markets are forward looking—we still don’t know the total fallout of this crisis and it’s likely the market will gradually price in changes to economic conditions before they become widely apparent."

Mark Haefele, CIO, Global Wealth Management, UBS:

“We think the market is now likely to shift attention toward 1) how quickly economic activity can sustainably “normalize,” and 2) forecasts for 2021 profits and economic activity. The latter will help provide an anchor point for the fundamental underpinnings of the equity market, while the former will influence the risk premium investors are willing to assign to future earnings."

Brad McMillan, CIO, Commonwealth Financial Network:

“Growth rates around the world are now at or below 10 percent. This number is not great. In fact, it implies that total cases will double in just over a week. But to put things in perspective, it is substantially better than the 15 percent of a week ago here in the U.S. (which doubled cases every five days) and the 30 percent of a couple of weeks ago (which doubled cases in less than three days). The difference between now and the start of the pandemic is that we can at least see the end

Chris Zaccarelli, CIO, Indipendant Advisers Alliance 

"News that Senator Sanders has dropped out of the presidential race is not that surprising given the large lead that Senator Biden enjoyed over him and the difficulties he would face – as would any other candidate – in resuming the kind of rallies and in-person political events that would be necessary to overcome that deficit in the face of the challenges that the Covid-19 pandemic has created. this was already the assumed outcome and was likely 99% priced into the market already."

Asset Allocation Team, Columbia Threadneedle Investments:

Our focus right now is on a defensive capital preservation, and our equity scorecard is suggesting caution on the back of falling macro indicators. Volatility still remains extremely high. We believe that holding strategic allocations steady at a neutral position is the appropriate way to balance short-term caution with the long-term expectation that markets will eventually recover.

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