American stocks rally sharply on COVID-19 optimism as earnings loom

Stocks rallied Monday, with all major indices snapping back into positive territories as investors seized on any positive developments in the fight to mitigate the spread of COVID-19, the disease caused by the coronavirus.

The stock market is, of course, not the economy. And this is likely a dead-cat bounce — a temporary recovery after a big fall. The question is how many dead-cat bounces will we see in the coming weeks?

And while the economic fallout from the COVID-19 pandemic is continuing, that didn’t stop investors from grasping at data from John Hopkins University that suggests the number of new COVID-19 cases is slowing. The institution’s coronavirus map, which has become a go-to source, showed 25,200 new cases rising on March 31, then rising to 33,300 new cases by April 3. Those numbers dropped to 28,200 new cases April 4, per its data; other trackers have posted slightly different results.

Today’s rally will be tested in the days and weeks to come as COVID-19 cases continue and eventually hit a peak before plateauing. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and a member of the White House coronavirus task force, has warned that cases, and deaths, will likely surge in the next week.

Here are the day’s results:

  • Dow Jones Industrial Average: up 7.59%, or 1,597.21 points, to close at 22.649.74
  • S&P 500: rose 6.95%, or 172.86 points, to close at 2,661.51
  • Nasdaq composite: popped 7.33%, or 540.15 points, to close at 7,913.24

There were other indirect COVID-19 fundamentals, such as new sales guidance or analyst notes that also moved certain stocks.

E-commerce stocks, including eBay and Amazon, saw positive movement. Online retailer Wayfair was perhaps the biggest mover in this category. The company’s shares opened 36% higher after reporting its gross revenue growth rate more than doubled at the end of March. Wayfair shares closed up 41.7% to $71.50.

Music streaming company Spotify saw shares decline more than 4% after Raymond James downgraded the stock from “strong buy” to “market perform,” citing that COVID-19 was causing less engagement and fewer downloads as users spend more time indoors. Spotify shares did manage to bounce back during the day and ended closing up nearly 0.33%, to $122.52.

Shares of SaaS companies rallied on the day as well, with the Bessemer cloud index rising 6.79% on the day; shares of SaaS companies, modern software firms, have enjoyed strong revenue multiples in recent years. They have tracked the broader indices down, however, and remain in bear-market territory.

Looking ahead, we’re entering earnings season during a period of intense economic uncertainty; how the stock market performs in the future will at least partially depend on how companies performed in Q1 2020, and what they project for the future. Get ready.