Shares rose Friday after a report said a Gilead Sciences drug showed some effectiveness in treating the coronavirus, giving investors some hope that there could be a treatment solution that would help the country reopen faster after the widespread shutdowns that hit the economy have plunged into a recession.
Dow Jones’ industrial average increased by 704.81 points, or 3%, to 24,242.49. It was the Dow’s first shutdown above 24,000 since March 10. The S&P 500 closed 2.7% higher, at 2,874.56, while the Nasdaq Composite rose 1.4% to 8,650.14. (Click here for the latest market news.)
Boeing’s share rose 14.7% after the aircraft manufacturer said it would resume production in the Seattle area as early as April 20. The company also said on Friday it would resume operations in the Philadelphia area.
“It is far too early to make it clear, but what this shows is that coronavirus is a health problem that requires a health solution,” said Michael Arone, chief investment strategist at State Street Global Advisors, on the prospects for coronavirus treatment. “If we can develop a health solution, I think, at least from a market perspective, it will recover pretty quickly.”
Friday’s win led the S&P 500 to its first back-to-back weekly win since early February, driving it above its 50-day moving average. The broader market index rose 3% this week, while the Dow rose 2.2%. The Nasdaq has advanced 6.1% to date. By the end of Friday, key averages were all more than 25% above their late March lows.
Gilead shares subsequently increased by 9.7% STAT news reported that a Chicago hospital that treated coronavirus patients with remdesivir in one trial quickly recovered from severe symptoms. The publication mentioned a video in which it was obtained discussing the trial results.
“Effective treatment is a huge deal and would rather create a path to open the economy and resume normal ‘social activities’ than a vaccine,” said Tom Lee, chief research officer at Fundstrat Global Advisors. “A treatment is safer and more scalable because it is only given to people who need treatment.”
Other studies have shown that remdesivir is an effective treatment against coronavirus. However, they have been smaller in size. Gilead himself also warned that anecdotal reports are not yet sufficient to determine whether the drug will be an effective treatment.
Still, CNBC’s Jim Cramer said the drug could give the economy a “fighting chance.”
“Remdesivir sounds like something that can quickly get people out of hospitals,” Cramer said in a tweet on Thursday. “That gives our economy an opportunity to fight … I think brake desivir would reduce morbidity … which would change how quickly we can open … and what we can do.”
Investors have cut their positions in work-from-home plays such as Amazon, Netflix and Walmart. Amazon dropped 1.4% while Netflix fell 3.7%. Walmart slid 0.2%. Still, Amazon and Netflix closed more than 14% this week, while Walmart won 8.5%.
Comeback from the market
Shares tumbled from record highs in February to a bear market a month later, when the spread of the corona virus stirred market sentiment and the economic outlook. According to Johns Hopkins University, more than 2 million cases have been confirmed worldwide, including more than 650,000 in the United States. Governments urged people to stay at home, effectively shutting down the global economy.
But the stock market has been on the rise since March 23, when new cases of coronavirus in the United States and worldwide showed signs of flattening. President Donald Trump said on Thursday that “our experts say the curve has flattened and the peak is … behind us.”
He also issued guidelines to open parts of the US on Thursday evening, identifying the conditions necessary for parts of the country to get workers back to work. The decision to lift the restrictions will ultimately be made by state governors.
The S&P 500 has risen more than 30% from its March 23 intraday low, while the Dow has gained 33.1% during that time.
Of course, the outbreak has already dealt a tremendous blow to the economy. In four weeks, about 22 million Americans have lost their jobs. Retail sales saw their biggest decline ever last month.
Investors have said that news of effective treatment or vaccination would be necessary for stocks to make a sustainable comeback.
“If it is effective in preventing someone from catching the virus or, more likely, reducing its severity, it would be a major change and [would] make the economy reboot both faster and more completely, “said Jim Paulsen, chief investment strategist at The Leuthold Group, on the Remdesivir report.
—CNBC’s Yun Li, Pippa Stevens and Tom Franck contributed to this report.
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