My explanation. See if this makes sense to you.
Nothing in the rear view window matters to Wall Street right now. Â Not first quarter earnings. Not economic growth or the lack thereof.
Nothing in the second quarter matters either. Forecasts of a 30% or more drop in annualized GDP in the quarter that ends on June 30? So what!
All that matters is how soon the coronavirus recession ends. When significant portions of the economy re-open. And when consumers start buying again.
Anything that advances the timetable for the resumption of normal economic activity produces a rally. Today we had news from Gilead Sciences (GILD) that its remdesivir coronavirus treatment–not a vaccine, mind you, but treatment for people sick with the virus–had shown good results in treating patients seriously ill from the disease. (Results from a Chinese trial, which have now been published in a peer reviewed journal, are nowhere as rosy as the company take. But the markets chose to believe the self-interested drug company over the Chinese, who we “know” never tell the truth about anything concerning the coronavirus.) Gilead’s treatment wouldn’t end the spread of the disease but having a treatment for the virus would, presumably, go a long way to reassuring consumers that they can resume their normal economic lives. At least there’s a treatment, right?
Same thing goes for continued news of more re-openings. We don’t know if they will produce another wave of the disease, but each re-opening of a barber shop or park brings us a step closer to business as normal.
So the big stock winners today were the shares of companies that would benefit the most from a return to a normal economy–even if there is no evidence that the industry in question–airlines, for example–are anywhere near normal revenue. American Airlines (AAL), which stands a good chance of going into bankruptcy before we return to normal air traffic, was up 12.17% at the close. Disney (DIS), which sure wants to re-open its theme parks sooner rather than later, climbed 5.69%. Shake Shack (SHAK), which would love to sell some burgers and shakes to a confident consumer, gained 7.67%.
For the day, the Standard & Poor’s 500 was up 2.66% and the Dow Jones Industrial Average climbed 2.21. The technology heavy NASDAQ Composite rose 3.57%. But the small bank and domestic small company Russell 2000 index led with way with a 4.83% move to the upside.
