Stocks rally on hopes for vaccine and economic recovery

Stocks on Wall Street bounced back Monday from their worst week in nearly two months as optimism about a potential vaccine for the coronavirus and hopes for a U.S. economic recovery in the second half of the year put investors in a buying mood.

The Standard & Poor’s 500 index climbed 3.2%, its best day since early April. The gains erased all of its losses from last week, when the index posted its worst showing since late March and its third weekly loss in the last four. Bond yields rose broadly, another sign of investor optimism.

Stocks were already headed for a higher opening on Wall Street when a drug company announced encouraging results in very early testing of an experimental coronavirus vaccine. The stock of the company, Massachusetts-based Moderna, jumped 20%.

Investors were also encouraged by remarks over the weekend from Federal Reserve Chairman Jerome H. Powell, who expressed optimism that the U.S. economy could begin to recover in the second half of the year. Once the outbreak has been contained, he said, the economy should be able to rebound “substantially.”

The S&P 500 climbed 90.21 points to 2,953.91. The benchmark index is still down 12.8% from the all-time high it reached in February.

The Dow Jones industrial average advanced 911.95 points, or 3.9%, to 24,597.37. The Nasdaq composite rose 220.27 points, or 2.4%, to 9,234.83. Small-company stocks fared better than the rest of the market. The Russell 2000 index surged 76.70 points, or 6.1%, to 1,333.69.

Investors are hoping that a working vaccine for COVID-19 can be developed and that it will help reassure people and businesses as the economy reopens.

“The question of how quickly people come back, or will they come back to the way they used to do things — that’s much different if you have a vaccine,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.

Traders are also encouraged that, so far at least, there hasn’t been a lot of data implying the reopening of the economy will lead to a resurgence in the number of COVID-19 cases, said Sam Stovall, chief investment strategist at CFRA.

“Of course,” he said, “we could end up giving back some of these gains should additional information contest our beliefs.”

Technology, financial and industrial stocks accounted for a big slice of Monday’s broad gains, along with companies that rely on consumer spending. And energy stocks rose as the price of U.S. crude oil closed above $30 a barrel for the first time in two months. Oil production cuts are kicking in at the same time that demand is rising as the U.S. and other countries ease some of the restrictions aimed at stemming the spread of the virus.

Benchmark U.S. crude oil for June delivery jumped 8.1% to settle at $31.82 a barrel. July Brent crude oil, the international standard, vaulted 7.1% to $34.81 a barrel.

Bonds yields rose. The yield on the 10-year Treasury climbed to 0.72% from 0.64%.

Fears of a crushing recession due to the coronavirus sent the S&P 500 into a skid of more than 30% from its February peak. Hopes for a relatively quick rebound and unprecedented moves by the Federal Reserve and Congress to stem the economic pain fueled a historic rebound for stocks in April.

May got off to a downbeat start as investors balance cautious optimism of a recovery as economies around the world slowly open up again against worries that the moves could lead to another surge in coronavirus infections and more economic uncertainty. But Monday’s strong start to the week reversed all of the market’s losses so far this month.

“We had a near 30% advance from the March 23 low to April 17, and then basically treaded water for a month as investors were expecting some sort of a retest of the prior low, which obviously did not come,” Stovall said. “Usually, markets need to catch their breath after a sprint higher.”

Wall Street is hoping that the reopening of businesses and the relaxation of stay-at-home mandates continue without any major setbacks, paving the way for corporate profits to bounce back.

Europe has been taking steps to reopen its economy more widely, and so far, new infections and deaths have slowed considerably across the continent. Some countries there started easing lockdowns a month ago and even the harshest shutdowns — such as those in Italy and Spain — have loosened significantly.

Markets in Europe and Asia also climbed Monday.