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Stocks close higher on hopes worst of virus has passed

CNBC logoCNBC 5/8/2020 Fred Imbert

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Stocks ended higher Friday even after the ugliest monthly jobs report ever as traders bet the worst of the coronavirus and its impact on the economy has passed.

The Dow closed up 455 points, or 1.9%. The S&P 500 gained 1.7%, while the Nasdaq climbed 1.6%.

For the week, the Dow and S&P 500 were up 2.5% and 3.5%, respectively, while the Nasdaq jumped 6%. All three averages posted their first weekly advance in three weeks.

“You have investors that seem to be able to look through the tsunami of negative economic data and earnings and towards the potential for a gradual reopening of the economy,” said Art Hogan, a market strategist at National Securities.

The Labor Department said a record 20.5 million jobs were lost last month, adding the unemployment rate jumped to 14.7% from just 4.4%. Both the spike in job losses and the unemployment-rate surge are post-World War II records.

To be sure, neither print was as bad as feared. Economists polled by Dow Jones expected a loss of 21.5 million jobs and an unemployment rate of 16%.

Stocks have rallied aggressively off their March lows as investors bet on an eventual reopening of the economy and that many tech companies would see solid revenue even through the shutdowns. Apple said Friday it will reopen stores starting next week, with temperature checks and a limited number of customers in the location at one time.

The S&P 500 has bounced more than 30% from its virus low and is just 15% from a record. The Nasdaq is more than 35% off its lows and is now up 1.3% for 2020. Gains from Facebook, Amazon Alphabet and Apple helped lift the index back into positive territory for 2020. At one point, the Nasdaq was down more than 25% year to date.

“It’s amazing, really, given we’re still working from home,” JJ Kinahan, a market strategist at TD Ameritrade, said about the average clawing back its 2020 losses. “Our reality is we’re working from home and some of the economic demand would seem to be less, yet these stocks continue to fight through.”

Kinahan also noted the market continues to price in a swift reopening of the U.S. economy after the coronavirus forced economic activity to a near screeching halt. “There’s this sense of, ‘OK, we’re going to get back to work and things are going to be better.’ But at what pace are they going to get better, and will that be sustainable?”

Stocks that would benefit from reopening the economy rose again Friday. Airline stocks such as Delta, American and United all gained at least 3.3%. Disney climbed 2.3% while MGM Resorts advanced 3.8%.

“It’s a bad environment,” said Robert Tipp, an investment strategist at PGIM Fixed Income, about the health and economic situation. “But in terms of markets, they appear to be attractively priced relative to what’s going on.”

Sentiment on Wall Street was also aided after Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer spoke to Chinese Vice Premier Liu He late on Thursday about the phase one trade deal signed in January. In a statement, they said both sides “agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner.”

The call and subsequent statement came amid rising tensions between both countries, as U.S. officials criticized China’s initial handling of the coronavirus outbreak.

But Michael Shaoul, the chairman and CEO of Marketfield Asset Management, said the market’s recent moves, which have been tame compared with others seen this year, suggest “an understandable fatigue with the constant stream of conflicting information about the progress of the virus and potential for happier and more drastic outcomes in the months ahead.”

CNBC’s Yun Li contributed reporting.

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