US stocks close higher as strength in banks offsets virus woes

New York — Wall Street’s main indexes closed higher in choppy trading on Thursday, with bank stocks soaring ahead of annual stress test results and helping to offset investor jitters over alarming increases in new coronavirus cases.

The recently battered S&P 500 banks subindex led the gainers for the session after US banking regulators eased rules and investors waited for results of the sector’s annual stress test, which helps determine dividend policies.

The bank index had fallen 19% from its recent high on June 5 to Wednesday’s lowest point. It rose as much as 3.75% on Thursday.

But investors remained nervous throughout the day as the number of new virus cases in US states grew, especially in the West and South.

Texas governor Greg Abbott said he was halting his state’s phased economic reopening in response to a jump in Covid-19 infections and hospitalisations.

Stocks wobbled temporarily late in the session after Apple said it would close 14 stores in Florida again because of rising Covid-19 cases after other re-closures in Houston, Arizona, South Carolina, and North Carolina.

A flare-up in virus cases in recent days has taken some wind out of a Wall Street rally powered by hopes of a quick economic recovery and huge government stimulus efforts.

After coming within 4.5% of its record high on June 8, the benchmark S&P 500 has lost ground.

While bank stocks appeared to provide the biggest boost on Thursday, Michael James, MD of equity trading at Wedbush Securities in Los Angeles, said investors were broadly buying the dip after Wednesday’s pullback in stocks.

“None of those issues that caused yesterday’s weakness were really resolved today,” said James. “You could argue that the market could be a fair amount lower. The reason we’re not is there is still some understanding that things are going to have a brighter ending at some point.”

The Dow Jones Industrial Average rose 298.77 points, or 1.17%, to 25,744.71, the S&P 500 gained 33.34 points, or 1.09%, to 3,083.67 and the Nasdaq Composite added 107.84 points, or 1.09%, to 10,017.00.

All the three major indexes had opened Thursday’s session lower after data showed the number of Americans filing say for unemployment benefits fell less than expected last week, likely as hiring by reopening businesses is being partly offset by a second wave of layoffs.

But the S&P’s financial sector gave the benchmark its biggest boost after regulators unveiled two rules easing restrictions covering large banks with complex trading and investment portfolios.

The Federal Reserve will release results of annual bank stress tests after the markets close, potentially indicating how much flexibility they will have to return capital to shareholders.

“The risk-reward bias favours a more positive bias into the results this evening because the sector has been such a laggard,” said Wedbush’s James.

Walt Disney fell for the second day in a row after it delayed the reopening of theme parks due to the health crisis. A report also said it was considering postponing the July 24 release of “Mulan.”

Boeing  tumbled as rival Airbus reached a crucial jetliner production target and smoothed recent industrial problems.

Reuters