(Associated Press) Wall Street pushed higher Thursday after a surge in oil prices helped resuscitate beaten-down energy stocks.
The gains helped overshadow another report showing the coronavirus outbreak is forcing a record-breaking number of Americans into the unemployment queue.
The S&P 500 was up 2% in midday trading after flipping between small gains and losses shortly after the opening bell. It took off with the price of oil, which surged more than 30% immediately after President Donald Trump said he expects Saudi Arabia and Russia to back away from their price war.
Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!— Donald J. Trump (@realDonaldTrump) April 2, 2020
The two sides have continued to pull oil out of the ground to maintain their market share, even as demand for energy cratered because of widespread stay-at-home orders and other economy-damaging restrictions caused by the coronavirus outbreak. The resulting buildup of oil supplies sent crude’s price spiraling by roughly two thirds in the first three months of the year.
Benchmark U.S. crude oil pared its gains following its immediate rocket ride higher, and it was up 24% at $25 per barrel, shortly after noon Eastern time. It’s rallying back after dropping below $20 earlier this week to its lowest price since 2002. At the year’s start, oil was above $60.
That helped energy stocks in the S&P 500 rally 10%, by far the biggest gain among the 11 sectors that make up the index. EOG Resources jumped 13.3%, ConocoPhillips leaped 13.4 and Schlumberger added 12.6%, but all three remain down by nearly half for the year.
The Dow Jones Industrial Average rose 344 points, or 1.6%, to 21,287, and the Nasdaq was up 1.6%.
Like oil, stocks gave up some of their gains after their initial jump higher as markets weigh how definitive Trump’s comments were. He tweeted only that he expects and hopes for upcoming production cuts after talking with Saudi Crown Prince Mohammad Bin Salman.
The S&P 500 had been down as much as 0.6% earlier Thursday morning after the U.S. government reported that more than 6.6 million Americans applied for unemployment benefits last week. That’s double the prior week’s number, which itself was nearly five times the prior record set in 1982.
Roughly one of every 16 Americans in the workforce has applied for unemployment benefits in the last two weeks, and economists expect the number only to rise further. That has many investors bracing for what may be the worst recession of their lifetimes.
There are more than 962,000 confirmed cases worldwide, led by the United States with more than 216,000, according to a tally by Johns Hopkins University.
For most people, the 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, and death.
Many investors expect markets to remain incredibly volatile until the number of new infections peaks, which would help clear the uncertainty about how bad the upcoming downturn will be and how long it will last. The S&P 500 is still down more than 22% for 2020 so far, and investors are preparing for companies to soon begin reporting weaker profits from year-ago levels.
“The duration and impact of this virus remains unknown and volatility will remain the norm and not the exception,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.
“It’s hard to envision the market moving meaningfully higher until you get some visibility of where earnings are going to go,” he said.
To help cushion the blow, Congress last week agreed on a $2.2 trillion economic aid package and the Federal Reserve promised to buy as many Treasurys as needed to keep credit markets running smoothly.
Legislators are collecting ideas for a possible new round of aid. President Donald Trump tweeted his support for a $2 trillion infrastructure package. But top Republicans in Congress say they first want to see how well their newly approved programs do.
Combined with last week’s report that 3.3 million people sought unemployment aid two weeks ago, the U.S. economy has now suffered nearly 10 million layoffs in just the past few weeks — far exceeding the figure for any corresponding period on record.
The stunning report Thursday from the Labor Department showed that job cuts are mounting against the backdrop of economies in the United States and abroad that have almost certainly sunk into a severe recession as businesses have shut down across the world.
“This kind of upending of the labor market in such a short time is unheard of,” said Heidi Shierholz, an economist at the Economic Policy Institute, a progressive think tank.
Further signs of a surging wave of layoffs are likely in the coming weeks. Seth Carpenter, an economist at Swiss bank UBS, estimates that about one-third of last week’s claims had been delayed from the previous week, when state offices that handle unemployment benefits were overwhelmed by a surge of online and telephone claims. Yet many of those offices are still struggling to process all the claims they have received, suggesting more claims will be pushed into the following week.
The magnitude of the layoffs has led many economists to envision as many as 20 million lost jobs by the end of April. That would be more than double the 8.7 million jobs lost during the Great Recession. The unemployment rate could spike to as high as 15% this month, above the previous record of 10.8% set during a deep recession in 1982.
Employers are slashing their payrolls to try to stay afloat because their revenue has collapsed, especially at restaurants, hotels, gyms, movie theaters and other venues that depend on face-to-face interaction. Auto sales have sunk, and factories have closed.
Roughly 90% of the U.S. population is now under stay-at-home orders, which have been imposed by most U.S. states. This trend has intensified pressure on businesses, most of which face rent, loans and other bills that must be paid.