The Dow Jones Industrial Average climbed more than 1,300 points on Thursday to close the day up 6.4%, continuing its record run and tallying its biggest three-day gain since 1931.
The Dow has climbed more than 20% in the past three days and the S&P 500 is also up more than 20% since Monday’s close as well.
Stocks got a double shot of good news on Thursday, as the Senate passed the $2 trillion economic stimulus bill that will help the country recover from the devastation caused by the coronavirus.
The House of Representatives will try to get the bill passed today, although it will require a voice vote, since most of the representatives have left Washington amid the outbreak. House speaker Nancy Pelosi said the bill will be passed “with strong bipartisan support.”
If the bill passes as expected, Treasury Secretary Steve Mnuchin hopes to get the stimulus checks into the hands of Americans within three weeks.
“We’re determined to get money in people’s pockets immediately,” Mnuchin said.
Also helping push stocks higher were comments from Federal Reserve Chairman Jerome Powell, who hinted that there’s more the Fed can do if called upon to help the economy recover.
Appearing in the Today show, Powell said “We still have policy room in other dimensions to support the economy. We’re trying to create a bridge from a very strong economy to another place of economic strength.”
He added, “When it comes to this lending, we’re not going to run out of ammunition, that doesn’t happen.”
Some investors, however, aren’t convinced that the rally is sustainable.
Ken Berman, a strategist at Gorilla Trades says “Even though equities were squeezed higher into the close, credit markets continue to diverge substantially. You could almost smell the burning shorts on Wall Street [Thursday], but as credit spreads remain wide, one has to wonder how much ‘real’ buying is behind this week moves, besides the bailout-induced short-covering.”
And Gregory Faranello, the head of US rates trading at AmeriVet Securities, adds “This is going to be an economic fallout. We’re seeing in two weeks what we would normally see maybe in a year and a half or two years.”
Much of the doubt surrounding the market’s ability to sustain a rally comes from the abysmal weekly jobless claims report yesterday.
Despite a record number, the market, at least temporarily, shrugged off the historically bad number.
It wasn’t as bad as expected.
The Labor Department reported that jobless benefit claims had soared to 3.28 million last week, marking the worst week ever by a very large margin.
The previous record was 695,000 set in October 1982 during the recession.
Yesterday’s report more than quadrupled that number, yet the market still surged higher because it wasn’t as bad as the 4 million claims that some expected, including Citibank.
Even with a record number of jobless claims yesterday and expectations for things to get much worse in the second quarter, the stock market shrugged off the bad news.
There’s a reason for that, according to Randy Frederick, vice president of trading and derivatives at Charles Schwab.
“The markets and the economy don’t run in parallel. The market’s running way ahead of the economy. The markets don’t care about what’s happening today, the market cares about what’s happening six months from now.”
Time will tell if the stock market can continue to be optimistic about the future if the reported numbers keep deteriorating and millions of Americans become unemployed.