US stocks rose on Monday as investors weighed expanded efforts in the US to combat the novel coronavirus outbreak as well as increased hopes for rapid testing and a vaccine. Healthcare stocks were notable outperformers.
Investors were also encouraged by signs that the US government is taking coronavirus-containment efforts seriously. President Donald Trump said on Sunday that federal social-distancing measures in the US would continue through April 30, casting aside earlier statements he made about easing restrictions and reopening the US economy by April 12.
Oil slumped on Monday to close at an 18-year low as the coronavirus pandemic continued to weigh on demand, halting travel and slowing economic activity around the world. Meanwhile, a price war between Russia and Saudi Arabia has threatened to create a record supply glut.
“We should expect volatility and the market to retest lows for a while,” Ed Campbell, a portfolio manager and managing director at QMA, told Business Insider. “We are going to be in the midst of this process for a while.”
Investors are looking for signs that lockdowns are working in countries outside of Asia, according to Campbell. A peak and eventual decline in new cases could be an important inflection point for markets because it would create the sense that lockdowns had contained the virus in other Western economies, he said.
“At that point we’d be on the road to returning to some semblance of normalcy,” Campbell said.
“Investors are likely assuming that in a matter of several weeks or a couple of months, we may return to normal, but that may prove to be a very risky bet,” Hussein Sayed, the chief market strategist at FXTM, told Business Insider. Until investors see a “major decline” in the number of COVID-19 cases, “any rally in risk assets may prove to be temporary,” he said.
Investors will be up against more economic data this week showing the impact of the coronavirus outbreak on the US. The first quarter ends on Tuesday, the last day of March, marking a key day for businesses that may struggle to pay bills. The US manufacturing purchasing managers’ index will be released on Wednesday, followed by weekly jobless claims on Thursday and the March jobs report on Friday.
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