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This Is Why the Dow Jones Soared While Its 2 Biggest Stocks Dove

Last Updated September 23, 2020 1:50 PM
Francois Aure
Last Updated September 23, 2020 1:50 PM
  • The Dow Jones soared, even as its two biggest stocks suffered declines.
  • Investors are cheered Gilead Sciences’ remdesivir drug’s early success in treating coronavirus patients.
  • Boeing Stock supported the Dow with a monster rally.

The Dow Jones closed the week on a high note as optimism about resuming economic activity and finding an effective treatment for COVID-19 gave a jolt of support to the stock market.

All eyes are on Michigan is it prepares to begin reopening its economy on May 1. Adding to the index’s strength, Dow giant Boeing intends to bring 27,000 employees back to work at its Seattle area manufacturing plant next week.

Dow Jones Defies a Brutal Oil Price Crash

Dow Jones, Stock Market, Coronavirus
The Dow Jones rallied into the weekend as the stock market embraced hopes of a coronavirus treatment and a gradual reopening of the U.S. economy. | Source: Yahoo Finance 

All three major U.S. stock market indices  rallied into the weekend, although the Nasdaq trailed well behind the Dow and S&P 500 when the closing bell rang:

  • The Dow soared 704.81 points or 2.99% to 24,242.49.
  • The S&P 500 rose 2.68% to 2,874.56.
  • The Nasdaq increased by 1.38% to 8,650.14.

In the commodity sector, the price of crude oil slumped 8.7% to just $18.15 per barrel. Trump’s production cut with OPEC+  has failed to lift the market amid unprecedented supply destruction.

The weakness in oil was not a problem for the stock market, and major oil companies like Exxon Mobil (+10.4%) and Chevron (+9%) were generally higher on Friday.

China’s GDP numbers were rough , but its industrial production data continued to show resilience. If there is truth to these statistics, they are encouraging for the prospect of the U.S. economic recovery.

U.S. plans to ease lockdown restrictions are ramping up, and it looks like Michigan is going to be the guinea pig when it reopens its state economy on May 1.

Remdesivir Hopes Pump the Stock Market

Dow futures soared higher on Thursday night after news of a clinical trial from Gilead Sciences indicated that their remdesivir drug was exhibiting promising results in treating coronavirus patients during clinical trials.

Now that Wall Street has had some time to digest the actual implications, several caveats have been made clear.

Most importantly, Gilead’s drug is not a vaccine. So while it could help get patients out of intensive care , it does not solve the problem of mass outbreaks overwhelming the healthcare system.

Despite these limitations, investors hungry for signs that the global economy is developing weapons against COVID-19 are seeing reasons to be optimistic.

Yet Joshua Mahony, senior market analyst at I.G., is skeptical about whether this evidence is truly a game-changer, telling CCN.com,

The release of Chinese data overnight provided us with a timely reminder of just how much economic damage this virus has caused, with Q1 GDP shrinking by 6.8%.

The two things that are now underpinning this bullish market sentiment are hopes for easing restrictions and the potential for a medical breakthrough. Until we start to see either of those undermined, further upside looks likely for risk-assets.

The performance of the Dow Jones is still baffling to many investors, with a number of prominent fund managers warning that there is a considerable amount of downside lurking in equity markets .

Most of these bears are focusing on historic levels of unemployment, along with its long-term negative impacts on consumer spending.

Dow Jones, Stock Market, Consumer Spending, DB
Source: Carl Quintanilla via Twitter 

Dow 30: Boeing Posts a Staggering Rally, Apple & United Healthcare Slip

The Dow 30’s robust rally belied some substantial volatility among the index’s biggest members.

Boeing stock exploded 15% higher to $154. The catalyst for this move was its decision to restart manufacturing in the Seattle area next week, with 27,000 employees set to resume production amid stringent social distancing measures.

Boeing stock’s outlook is still far from secure. Airlines remain in a terrible spot, and the aerospace giant’s order book has never been uglier .

At the other end of the spectrum, the Dow Jones’ two heaviest-weighted stocks, Apple (-1.4%) and United HealthGroup (-2.6%), both traded lower. Together, the two companies have a ~17% weighting in the 30-member DJIA.

This article was updated after the closing bell to record the stock market’s end-of-day pricing.