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Stocks rose on Tuesday in response to news that the first batch of first-quarter earnings reports turned out better than feared. Investors continued to welcome signs that the world economy is slowly reopening, with coronavirus spreading at a decreasing rate.
The Dow Jones Industrial Average closed up 559 points, or 2.4%, after dropping 1.4% on Monday. The S&P 500 rose 3.1% and the Nasdaq Composite climbed 4%.
It continues a relatively volatile stretch for the market, with the S&P 500 notching its 38th move of at least 1%—up or down—in 2020. That surpasses last year’s total, just over a quarter of the year in. Tuesday’s gain was broadly shared, as more than 85% of the S&P 500’s companies ended in the green, even as the International Monetary Fund gave a grim forecast for global economic conditions in 2020.
JPMorgan Chase (ticker: JPM), Wells Fargo (WFC), Johnson & Johnson(JNJ), and Fastenal (FAST) were among the major companies that released earnings on Tuesday morning. J.B. Hunt Transport Services (JBHT) followed after the closing bell.
Stock indexes rose overseas as well: Japan’s Nikkei 225 closed up 3.1% while China’s Shanghai Composite gained 1.6%. The Stoxx Europe 600 index ended up 0.6%, as Germany’s DAX gained 1.2%, France’s CAC 40 climbed 0.4%, and the U.K.’s FTSE 100 Index fell 0.9%.
“Markets are restarting after a long Easter weekend with a positive tone. Things have moved on from when there was so much bad news that the weekend was to be avoided at all cost,” said Jasper Lawler, head of research at London Capital Group.
The advance comes as the number of new cases appears to have peaked in the U.S., the eurozone and the U.K. The daily increase in new cases was the lowest since March 10, according to data compiled by Deutsche Bank. And according to Johns Hopkins, new Covid-19 cases diagnosed in the U.S. Monday fell to 24,900, the least since March 31.
Some countries are moving, slowly, to restart their economies. Austria on Tuesday is reopening small shops, while Spain has let some construction and manufacturing businesses resume operations.
Traders also noted that China’s exports and imports in March dropped at a slower rate than forecast. Chinese exports dropped 6.6% in March from a year earlier, after falling 17.2% over January and February, while Chinese imports fell 0.9% from a year earlier, compared with a 4.0% decline in the first two months of the year.
Travel-related stocks continue to gyrate more wildly than the overall market on Tuesday. Cruise operator Carnival (ticker: CCL) shares closed up 8.8% after a drop of 7.4% Monday. American Airlines (AAL) shares rose 3.3%, following a 7.6% decline the day before. And Expedia (EXPE) stock gained 4.7% in Tuesday trading after shares fell 5.8% Monday.
Stock in the gold miner Newmont (NEM) rose 0.2% on Tuesday. Gold shares often rise as investors’ fears worsen. The price of the commodity slipped 0.4% on Tuesday, to $1,753.60 an ounce. Gold prices are up about 15% year to date, while Newmont shares have risen almost 38%.
Other haven assets were mixed. The yield on the 10-year U.S. Treasury note was essentially flat, up less than 1 basis point, or hundredth of a percentage point, to 0.752%. The U.S. Dollar Index (DXY)—which measures the greenback against a basket of other currencies—fell 0.5%.
As they do every quarter, major banks kicked off earnings season this week.JPMorgan Chase went first and reported 78 cents in per-share earnings, while Wall Street was looking for $2.16.
It was a large shortfall, and not surprisingly, Covid-19 was to blame. Credit reserves—for future loan losses—grew by $6.8 billion because of the viral outbreak. The charge reduced per share earnings by $1.66 a share.
JPMorgan stock reversed an earlier gain to close down 2.7%, while Wells Fargo shares likewise initially rose, then fell 4%, after its own earnings report. A lot of bad news is already reflected in bank stocks. J.P. Morgan shares are down about 30% year to date, while the KBW Bank Index was down 36%.
The industrial distributor Fastenal (FAST) also reported first-quarter numbers, earning 35 cents a share, one penny better than Wall Street expected.
The company saw “activity levels weaken significantly” in March, according to its news release. That isn’t a surprise. About 10% of the facilities where Fastenal operates a distribution node inside a factory were closed due to Covid-19.
Shares ended up 7% Tuesday. Fastenal stock is down about 13% year to date.
Johnson & Johnson beat expectations for the first quarter and raised its dividend when it reported on Tuesday morning. That outweighed a major guidance cut for the rest of the year, and shares rose 4.5%.
The U.S. benchmark oil price fell 7.9%, to $20.65 a barrel, which weighed on many energy stocks. Apache (APA) shares fell 3.6%, Diamondback Energy(FANG) slipped 4.3%, and Exxon Mobil (XOM) ticked down 0.8%.
Finally, Tesla (TSLA) shares were on the move again, and rose another 9% Tuesday after jumping 13.6% Monday. Credit Suisse analyst Dan Levy upgraded shares from the equivalent of Sell to Hold. He isn’t a Tesla bull—his target price is $580 a share, below current levels—yet any upgrade, including one by a bearish analyst, can propel shares higher.