Dow jumps more than 500 points on promising coronavirus drug news

Major United Stocks indexes ended Wednesday higher after Gilead Sciences said studies of its experimental coronavirus treatment drug remdesivir were promising. The news boosted investor optimism and helped Wall Street shrug off dismal data that showed the US economy shrank for the first time since the Great Recession of 2008.

The Dow Jones Industrial Average ended the day up 2.21 percent to close at 24,633.86.  The S&P 500 – a proxy for the health of US retirement and college savings accounts – ended 2.66 percent higher, while the tech-heavy Nasdaq Composite Index finshed the day up 3.57 percent.

The US economy shrank 4.8 percent on an annualized basis in the first three months of this year as coronavirus lockdowns started sweeping the nation in March, the US Commerce Department said on Wednesday. The reading was the sharpest contraction since 2008 and effectively confirms that the US has entered a recession that economists expect will be far, far worse in the second quarter.  

But investors instead focused on promising news from Gilead Sciences Inc that studies showed its experimental antiviral drug remdesivir helped improve symptoms for patients with COVID-19, the disease caused by the coronavirus. Shares of Gilead were up 3.92 percent in late morning trading on Wall Street. 

Shares of Google parent company Alphabet Inc were up 8.8 percent as the initial dive in Google ad sales steadied in April and consumers returned to using the search engine for shopping and looking up information on COVID-19.

But economists continue to stress that the economic rebound will take more than just an easing of coronavirus restrictions.

Vicky Redwood, senior economic adviser at Capital Economics, reckons it will take several years for international travel and tourism “to return to ‘normal’, if indeed it ever does.”

“While we expect to see a sharp rebound in global activity once coronavirus-related restrictions are eased, GDP [gross domestic product] in most economies will still be below its pre-crisis path even after two or three years,” Redwood wrote in a Wednesday note. “Countries may be slow to lift travel restrictions. And people may be permanently put off [by] personal and business travel.” 

Boeing Co announced on Wednesday that it would cut 10 percent of its workforce and further reduce 787 Dreamliner production after reporting a loss for the second straight quarter. Shares of the aircraft maker were up 5.56 percent in late morning trading. 

The Dow energy sector was 4.3 percent higher after oil prices trended higher on news that the US crude stockpile rose less than expected in the week ending April 24. 

US benchmark West Texas Intermediate crude for June delivery was up $3.93 at $16.27 a barrel. 

A long, drawn-out recovery, shattered consumer demand, and crippled travel will in all likelihood continue to batter demand for oil, which in recent weeks has plummeted by 30 million barrels per day (bpd) – the total output of the US, Saudi Arabia and Russia combined.

Global E&P (exploration and production) revenues are forecasted to fall by about $1 trillion in 2020, a drop of 40 percent to $1.47 trillion from last year’s $2.47 trillion, according to Rystad Energy.  

“This drop not only undermines the companies’ solidity and reduces money available for investments and dividends, but also significantly cuts government tax revenue,” Rystad’s upstream analyst Olga Savenkova said in a Wednesday note.