US stocks rise, oil recovers some ground as Congress nears more stimulus

New York — Wall Street rose on Wednesday as oil prices recovered some ground and Congress was on course to seal nearly $500bn more in aid to help small businesses ride out the coronavirus crisis.

US crude and benchmark Brent prices edged higher after a collapse in the past two days, sending the S&P 500 energy index up 3.5%.

West Texas Intermediate rose 24.6% to $14.41 a barrel, climbing nearly 40% at one point,  and Brent North Sea crude was 4.9% at $20.28 in afternoon trade on Wednesday. Both had fallen earlier in the day.

All 11 S&P 500 sector indexes traded higher as the US Senate unanimously approved the new relief package, adding to trillions of dollars in stimulus that have helped Wall Street rebound from its March lows.

The House of Representatives is expected to clear the bill on Thursday.

“The (stimulus) response times have been way faster than what you saw in 2008. What you’re seeing is the tail risk removal that stops the equity downturn and allows the market to actually look,” said Anik Sen, global head of equities at PineBridge Investments in New York.

The benchmark S&P 500 is still 17% below its February record high as statewide shutdowns have sparked layoffs and crushed consumer spending, putting several industries at risk of collapse.

Estimates for US jobless claims for the latest week ranged as high as 5.5-million, while a reading on April US factory activity was likely to fall to levels last seen during the 2008 financial crisis. Both reports are due on Thursday.

Analysts have drastically cut their S&P 500 earnings expectations for the first and second quarters and are now projecting a corporate recession for 2020, according to IBES data from Refinitiv.

A week after the big US banks issued dismal 2020 forecasts, consumer discretionary and technology firms fared slightly better as the lockdown measures boosted demand for online streaming and home delivery of meals.

“I think this earnings season is really going to be a function of which companies and which industries are holding up … and are able to withstand the decline in this market and to ride it out,” said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.

Investors will also be paying close attention to capital allocation from companies, Perez said, “You have to have the cash to sustain and ride out to the other side.”

Burrito chain Mexican Grill jumped 11% after it reported soaring digital and home delivery sales and said it had enough cash and liquidity to get through the next year.

Netflix more than doubled its own projections for new customers in the first quarter. However, its shares fell 2.3% as it forecast a weaker second half if the lockdown measures were to be lifted.

The Russell 2000 index of US small-cap stocks rallied 1.3% but it remains down nearly 30% from its February high, reflecting smaller companies’ recent underperformance companied to Wall Street’s largest firms.

“Small caps and mid-caps still haven’t seen a recovery, and that tells me the economy is still in question,” warned Ben Philips, chief investment officer of the EventShares ETF.

With volatility the new normal on Wall Street, in midafternoon trade, the Dow Jones Industrial Average was up 1.94% at 23,465.51 points, while the S&P 500 gained 2.26% to 2,798.35. The Nasdaq Composite added 2.79% to 8,493.40.

Reuters