U.S. Stocks Jump on Good News About a Virus Treatment

The outcome of a Fed meeting, data expected to show a sharp drop in U.S. growth and big earnings news are on tap for investors on Wednesday.

The main U.S. stock indexes gained despite a bigger-than-expected drop in gross domestic product.

U.S. stocks surged on Wednesday as investors welcomed upbeat news about a potential treatment for coronavirus, shrugged off figures showing gross domestic product fell more than expected during the first quarter, and absorbed commentary from Federal Reserve Chairman Jerome Powell about the economy and the central bank’s plans.

The Dow Jones Industrial Average closed up 532 points, or 2.2%, after rising gradually through the day. The S&P 500 and Nasdaq Composite gained 2.7% and 3.6%, respectively.

Trading in shares of Gilead Sciences (ticker: GILD) was halted as the company said remdesivir, its antiviral drug, met its primary goal in a government trial. Although the result is far from definitive and the drug is even farther from being fully licensed or available at scale, it is a positive step nonetheless. Gilead stock closed up 5.7% after trading resumed in the morning.

“Remdesivir has a clear cut, significant positive effect in diminishing the time to recovery,” Dr. Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases said on Wednesday at the White House. “What it has proven is that a drug can block this virus.”

The market has been sensitive to news about remdesivir. Last week, the Dow erased a 400-point gain because the World Health Organization accidentally released information about a trial of the treatment in China that cast doubt on its efficacy, while the market roared higher in mid-April as a report raised hopes about the drug.

The positive remdesivir news outweighed a worse-than-forecast first-quarter U.S. GDP data release by the Bureau of Economic Analysis. The U.S. economy shrank at a 4.8% annualized rate in the first three months of the year, compared with the 3.5% economists had expected.

At a virtual press conference in the afternoon, Fed chair Powell said that the Federal Open Market Committee wasn’t announcing any new policy moves on Wednesday, but that it is prepared to act more if needed.

“We’re not going to be in any hurry to lift off these measures,” Powell said, referring to the Fed’s near-zero interest rate target and massive bond-buying programs. “We’ll wait until we’re confident that the economy is on the road to recovery.”

The Fed in recent weeks has taken aggressive measures to stabilize the economy during the coronavirus pandemic, including dropping interest rates and aggressively buying bonds. That support has helped the Dow, S&P, and Nasdaq rally consistently since late March.

The Russell 2000 also continued to rip higher on Wednesday, closing up 4.9%. It was the sixth-straight session of at least 1% gains for the small-cap index.

The Russell’s big rally has to do with investor optimism about the reopening of the U.S. economy. Several states have begun the gradual process of allowing nonessential businesses to operate and people to leave their homes. Small caps in general are domestically focused businesses that are particularly sensitive to the health of the broader economy. They also tend to have tighter profit margins than big companies.

So resuming economic activity makes a significant difference for them, and recent steps in that direction have sent their shares soaring.

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Stocks rose overseas as well. Asian markets ticked up on Wednesday: China’s Shanghai Composite closed up 0.4%, Hong Kong’s Hang Seng climbed 0.3%, and South Korea’s Kospi Composite gained 0.7%. Markets in Japan were closed on Wednesday.

In Europe, the Stoxx Europe 600 index closed 1.7% higher, as the German DAX jumped 2.9%, the French CAC 40 added 2.2% and the FTSE 100 index rose 2.6%, boosted in part by gains for big oil companies.

The price of oil continues to swing wildly. West Texas Intermediate, the U.S. benchmark was up 26.5% to $15.06. Brent crude oil, the price used globally, settled up 10.2% at $22.54.

Haven assets were mixed. The price of gold added 0.4% to $1,728.80 an ounce. The yield on the 10-year U.S. Treasury note reversed an earlier loss to rise just under 2 basis points, or hundredths of a percentage point, to 0.625%, as the price of the securities fell. The U.S. Dollar Index (DXY)—which measures the greenback against a basket of other currencies—lost 0.4%.

The Cboe Volatility Index, or VIX, fell over 6% on Wednesday, to just above 31 points. It’s the lowest the index has gone since late February and marks a significant drop from a string of closes in the 70s and 80s in March. Still, it is more than double the levels in the low teens where the VIX began the year.

Individual stocks are moving in response to the latest news about corporate earnings.

Boeing (BA) shares jumped 6% after reporting a wider-than-expected loss during the first quarter. Losses totaled $641 million or $1.70 a share, steeper than the $1.61 analysts expected. The company said its results were “significantly impacted” by the grounding of the 737 MAX and Covid-19. Boeing tried to assure investors that it has “sufficient liquidity” to fund operations.

General Electric (GE) shares fell 3.1% after reporting first-quarter profits that fell just short of Wall Street projections. The Street expected earnings of 8 cents a share, GE delivered earnings of 5 cents a share. GE said a “dramatic decline” in commercial aerospace hurt its first-quarter results.

Alphabet (GOOGL) shares were up 8.9% after the company, Google’s parent, reported its results late on Tuesday. The company said first-quarter revenue rose 13%, but it also acknowledged a drop in ad revenues in March as many businesses were forced to shut. Management said it expects the second quarter to be difficult for advertising.

Other shares were responding to rating changes. Walmart (WMT) declined 3.4% after getting cut to Accumulate at Gordon Haskett. Hormel (HRL) fell 0.3% after getting cut to Neutral from Overweight at Piper Sandler.

In Europe, airlines were in focus, with shares of British Airways parent International Consolidated Airlines Group tumbling close to 8%, then recovering to a 5.7% gain, after the airline said late Tuesday it would cut up to 12,000 jobs. IAG said it had begun a restructuring and redundancy plan as it expects the “recovery of passenger demand to 2019 levels will take several years.”

Spain and France announced plans on Tuesday to slowly come out of lockdowns, though air travel could be one of the last areas to recover from the pandemic as countries struggle to get reliable testing systems going.

Write to Barbara Kollmeyer at and Carleton English at

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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