U.S. Stock Futures Swing After Three-Day Rally on Stimulus Hopes

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U.S. stock futures fluctuated betweens gains and losses after the first three-day rally since February as investors speculated government and central-bank aid will offset the coronavirus’s damage to the economy.

Contracts on the S&P 500 were down 0.1% at 2,604.50 as of 7:04 p.m. in New York. The underlying gauge surged almost 18% over Tuesday-Thursday in the biggest rally since 1933, while the Dow Jones Industrial Average climbed 20% above its recent low, meeting the technical definition of bull market.

Investors have grown increasingly confident that a $2 trillion stimulus package and fresh assurances from the Federal Reserve will be enough to rescue the economy from a deep recession as the country braces for what is expected to be a sharp increase in the virus’s spread. Jobless claims more than quadrupled the prior record, providing the first evidence of how severe the damage will be.

“Combined with the Fed efforts, it’s going to get us a good way toward where we need to be,” said Kathy Jones, chief fixed income strategist for Schwab Center for Financial Research. “People are very happy we have gotten fiscal and monetary policy on board.”

The S&P 500 rose 6.2% Thursday in another dramatic move that has made trading on equity markets not for the faint of heart. Volatility remains elevated, with Cboe’s fear gauge closing above 60 for a record ninth straight day. If the furious moves persist in the futures market, exchange-mandated trading bands will prevent gains or losses from exceeding 5%. Those are set at 2,746 on the upper limit and 2,483 on the lower.

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Markets looked past jobless claims data showing a surge to a record 3.28 million Americans as businesses shut down to help prevent the spread of the virus. While the reading exceeded estimates, aid from the U.S. government may help offset the damage to workers and businesses. Fed Chairman Jerome Powell also sought to assure the public that the central bank wouldn’t run out of crisis-fighting ammunition.

“This is global economic paralysis that the markets are trying to price in,” said Philip Lawlor, FTSE Russell’s managing director of global markets research. “That means the economic data is going to be eye-poppingly bad. What we’re all trying to wrap out heads around is just how long this is going to last.”

The S&P 500’s surge since Monday is the best since the Great Depression. While weird, bounces of similar velocity happen from time to time in fast-moving markets and aren’t taken seriously by market historians until they start to show staying power.

Read more: A Bull Market in Banks and Other Weird Facts of the Stock Bounce

That the latest leg of the rally came just hours after the government reported a surge in the number of Americans seeking jobless benefits underscores how fragile the rally may be. The U.S. economy is in tatters after large regions of the country shut down to help prevent the spread of the deadly coronavirus.

“The overall positive tone in markets this week — better market functioning thanks to liquidity injections from central banks and now the stimulus bill in the U.S. to complement the ones we’re seeing in Europe — I think overall, there’s still a positive tone here,” said Brian Nick, chief investment strategist at Nuveen. But, he said, there’s an “understanding that we have huge economic challenges ahead of us.”

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