Dow soars 530 points as coronavirus treatment optimism overshadows GDP slump
- US equities soared on Wednesday as traders gained new hope from a successful coronavirus drug trial.
- Gilead announced Wednesday morning its remdesivir compound succeeded in a key trial.
- Investors' optimism toward the positive drug news overshadowed a 4.8% contraction in US GDP through the first quarter. Economists expected the metric to slide 3.8%, according to Bloomberg data.
- The Federal Reserve held interest rates close to zero and expects to maintain low rates "until it is confident that the economy has weathered recent events," Chairman Jerome Powell said in an afternoon press conference.
- Watch major indexes update live here.
US stock indexes gained on Wednesday as traders shrugged off dismal economic data and instead focused on promising drug trial news out of Gilead.
The biotech firm revealed its leading coronavirus drug remdesivir succeeded in a key study, saying "the trial has met its primary endpoint." Markets have previously soared on such news as investors wait for a viable option to combat the coronavirus.
Gilead shares surged as much as 11% following the report's release before paring gains and closing up 5.7%. Trading was initially halted on the news.
Here's where major US indexes stood at Wednesday's close:
- S&P 500: 2,939.51, up 2.7%
- Dow Jones industrial average: 24,633.88, up 2.2% (532 points)
- Nasdaq composite: 8,914.71, up 3.6%
White House health adviser Dr. Anthony Fauci later shared his own optimism for the treatment, calling the trial report "quite good news" and deeming the drug a new "standard of care" for COVID-19 patients.
"What it has proven is a drug can block this virus," he added.
The positive biotech news largely overshadowed dire updates to the nation's economic situation. US gross domestic product contracted by 4.8% in the first quarter, its worst decline since the financial crisis. Economists expected the metric to slide by 3.8%, according to Bloomberg data. The update officially ended the US's longest-ever economic expansion.
Federal Reserve Chair Jerome Powell spoke Wednesday afternoon after two days of Federal Open Market Committee meetings. The central bank held interest rates at historic lows and expects to maintain the range "until it is confident that the economy has weathered recent events," Powell said in prepared remarks.
The monetary policy update fell in line with Street expectations, and gave investors breathing room after weeks of unprecedented relief, unveiling of new lending pools, and bucking of central bank precedent.
"There's nothing new in this announcement," James McCann, senior global economist at Aberdeen Standard Investments, said. "It's sensible that the Fed take a brief pause to establish the impact of what they've already done. But they cannot afford to rest on their laurels."
Alphabet's post-earnings bounce further lifted indexes. The Google parent soared as much as 8% in early trading after revenue bested expectations. While CEO Sundar Pichai warned of a drastic slowdown in advertising sales, he praised YouTube and Google Cloud's revenue growth through the chaotic first quarter.
Oil retraced some losses posted earlier in the week, leaping 24% to $15.34 per barrel on Wednesday. Brent crude gained 10% to $22.60 per barrel. The gains follow the American Petroleum Institute reportedly saying oil inventories increased by nearly 10 million barrels last week, falling below analysts' 12 million barrel estimate. The statement suggests storage demand may be waning after last week's market meltdown.
Earnings reports from Facebook, Tesla, and Microsoft are slated for release after the market close. Amazon and Apple will release results Thursday.
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