U.S Stocks notched their best quarter in decades, as government stimulus and low interest rates helped markets start to recover from the damage of the coronavirus pandemic at the start of the year.
The rebound marks an about-face after Wall Street posted its worst period since the 2008 financial crisis when the pandemic battered the global economy in the first three months of the year.
A series of fiscal and monetary stimulus measures from Washington and the Federal Reserve have helped calm financial markets in recent months after policymakers rushed to support the economy from the deepest economic slump since the 1930s. The stock market’s gains come as a staggering 47 million Americans have filed for first time unemployment benefits in just 14 weeks following a wave of layoffs.
“The rebound sparked concerns that the markets have become unmoored from economic reality,” analysts at T. Rowe Price said in a note. “There remains significant uncertainty about the pandemic, which will likely lead to continued market volatility as businesses and consumers adapt to further disruptions in the global economy.”
The Dow Jones industrial average posted its strongest quarter since 1987 after surging 17.8% in the past three months. On Tuesday, the blue-chip average rose 217.08 points, or 0.9%, to 25,812.88.
The Standard & Poor’s 500 soared nearly 20% in the second quarter, its best quarterly gain since 1998. It climbed 1.5% Tuesday to 3,100.29. The Nasdaq Composite rallied 30.6% in the second quarter, its best such period since 1999. The technology-heavy index advanced 1.9% Tuesday to 10,058.76.
The S&P 500 has rallied within about 9% of its February record, bouncing back more than 35% since the March lows.
A recent bout of volatility, however, could threaten the stock market’s rebound as a resurgence in virus cases stoke fears of another round of lockdowns.
Investors have weighed evidence of an economic recovery against a rise in reported coronavirus contagions in some countries and states. Traders are worried about Texas and other states having to roll back their reopening plans as infections surge.
The number of confirmed cases globally is over 10.3 million, and the death toll is more than 505,500. There are more than 2.5 million cases in the U.S. and an excess of 129,000 deaths, according to the Johns Hopkins University data dashboard.
New infections could increase to 100,000 a day if the nation doesn’t get the ongoing surge under control, Dr. Anthony Fauci, the top infectious disease expert at the National Institutes of Health, told Congress Tuesday.
The major risks investors face in the second half of the year include uncertainty around a second wave of the virus, the upcoming U.S. presidential election in November and renewed trade tensions with China, analysts say.
“While the initial stages of lockdown easing have delivered a substantial bounce in activity, the next phase of the transition to normal will be far harder and the speed will be contingent on the number of new COVID-19 cases,” Ben May, director of global macro research at Oxford Economics, said in a note. “The renewed rises in COVID-19 cases in parts of the U.S. is a clear worry.”