US Stocks Drop, But Hold Weekly Gains  03/27 16:39

   Wall Street closed lower Friday but still notched big gains for the week as 
investors held out hope that a $2 trillion rescue package will cushion 
businesses and households from the economic devastation being caused by the 
coronavirus.

   (AP) -- Wall Street closed lower Friday but still notched big gains for the 
week as investors held out hope that a $2 trillion rescue package will cushion 
businesses and households from the economic devastation being caused by the 
coronavirus.

   The S&P 500 closed 3.4% lower, but still climbed 10.3% for the week, its 
biggest gain since March 2009. That follows two weeks of relentless selling. 
The Dow Jones Industrial Average's 12.8% weekly gain was its biggest since 
1938, thanks largely to Boeing, which climbed 70.5% this week.

   Stocks had soared over the previous three days as the relief bill moved 
closer to becoming law. It passed the House Friday afternoon and President 
Donald Trump signed it later in the day. The bill includes direct payments to 
households, aid to hard-hit industries like airlines and support for small 
businesses. Despite the help, analysts expect markets to remain turbulent until 
the outbreak begins to wane.

   Even after the rally this week the market is still down 25% from the peak it 
reached a month ago. The outbreak has forced widespread shutdowns that has 
ground much of the U.S. economy to a halt. This week more than 3 million people 
filed for unemployment benefits, shattering previous records. It's the first of 
what is sure to be many grim signs of the toll the virus is taking on the 
economy.

   "The key at this point is getting a handle on the spread of the virus so 
that then we can start to think about what (economic) growth looks like for the 
remainder of the year," said Willie Delwiche, investment strategist at Baird.

   The push to deliver financial relief is taking on more urgency as the 
outbreak continues to widen. The number of cases in the U.S. has now surpassed 
those in China and Italy, climbing to more than 86,000 known cases, according 
to Johns Hopkins University. The worldwide total has topped 550,000, and the 
death toll has climbed to more than 25,000, while more than 127,000 have 
recovered.

   For most people, the new coronavirus causes mild or moderate symptoms, such 
as fever and cough that clear up in two to three weeks. For some, especially 
older adults and people with existing health problems, it can cause more severe 
illness, including pneumonia, or death.

   Investors have yet to get a clear picture of exactly how badly the crisis 
has hurt corporate profits, the ultimate driver of stock prices. Very few 
companies have dared to issue forecasts capturing the damage, though traders 
are girding for discouraging results in the next few weeks as earnings 
reporting season begins. Many companies have simply withdrawn their profit 
forecasts altogether.

   At the start of this year, analysts expected S&P 500 companies' earnings 
would grow 4.4% in the January-March quarter. They now expect earnings will be 
down 4.1%, according to FactSet.

   Earnings for airlines, which have been hit by lost bookings as businesses 
and individuals canceled travel plans to minimize their risk of contracting the 
virus, are expected to be catastrophically bad. Delta went from an expected 
2.2% decline to a 108% plunge.

   Even the current forecasts may not yet reflect the size of the potential 
earnings declines this year, with only 15% of analysts having adjusted their 
estimates within the past couple of weeks, according to a report by Credit 
Suisse.

   The latest bout of selling left the S&P 500 down 88.60 points, or 3.4%, to 
2,541.47. The Dow slid 915.39 points, or 4.1%, to 21,636.78. The Nasdaq lost 
295.16 points, or 3.8%, to 7,502.38. The Russell 2000 index of smaller company 
stocks fell 48.33 points, or 4.1%, to 1,131.99.

   Cruise operators Norwegian Cruise Line and Carnival led the decliners in the 
S&P 500 Friday. The industry has been among the hardest hit by the economic 
fallout from the coronavirus. The companies are down more than 70% so far this 
year.

   The price of crude oil slid 4.8% to close at $21.51 a barrel. Goldman Sachs 
has forecast that it will fall well below $20 a barrel in the next two months 
because storage will be filled to the brim and wells will have to be shut in.

   That's sure to cause even more trouble for energy companies, which are 
lagging far behind the rest of the market. The price of oil has plunged 
recently, in part due to a price war that broke out early this month between 
Saudi Arabia and Russia. The energy sector of the S&P 500 has lost half its 
value this year.

   The yield on the 10-year Treasury fell to 0.68% from 0.81% late Thursday. 
Lower yields reflect dimmer expectations for economic growth and greater demand 
for low-risk assets.

   The overall downturn in the markets in recent weeks is creating good 
opportunities for investors to buy into sectors of the market that will be 
"prevalent" for the next decade, including e-commerce and technology companies 
that focus on things like gene therapies, said Solita Marcelli, deputy chief 
investment officer, Americas, at UBS Global Wealth Management.

   The strong rallies this week have prompted some analysts to suggest the 
worst of the selling could be over. But most expect stocks to touch on recent 
lows again until there have been enough sustained gains in the market, and 
progress in fighting the pandemic, to ease investors' fear of further declines.

   "The takeaway from this week is the initial down phase has probably run its 
course," Delwiche said. "Investors can get out of the duck-and-cover mode and 
start to figure out what they need to do. It doesn't mean that we've gotten an 
all-clear signal." 


(CZ)