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Dow Escapes Bear Market With a 6% Rally
The blue-chip index is now up 20% from its low, qualifying as a new bull market

By Caitlin McCabe, Anna Hirtenstein and Chong Koh Ping
Updated March 26, 2020 5:31 pm ET
U.S. stocks soared Thursday as the government came closer to approving a $2 trillion stimulus package to combat the coronavirus pandemic, capping a three-day rally that has pushed the Dow Jones Industrial Average into a bull market.

The Dow industrials finished the day up 1351.62 points, or 6.4%, to close at 22,552.17. The jump ends an 11-trading day bear market for the index—the shortest in history for the Dow—which reached its bear-market low just three days ago.

Index performance
Source: FactSet

%
U.S. jobless claimshit 3.3 million
DowIndustrials
S&P 500
March 24
March 26
0
5
10
15
20
25

The rapid plunge out of, and then back into, a bull market underscores just how volatile U.S. stocks have become as the coronavirus pandemic ripples through the economy. The Dow industrials are still down 21% for the year, despite also climbing 21% in the last three days—the largest three-day percentage gain for the index since 1931.

The S&P 500 also ended the day higher, climbing 154.41 points, or 6.2% to 2,630.07, helping the index to similarly reach its largest three-day percentage jump in nearly 87 years. The tech-heavy Nasdaq composite jumped 413.24 points, or 5.6% to 7,797.54. Both indexes are still far from returning to a bull market.

Investors had been jittery leading up to the release of the latest weekly jobless claims data. Futures tied to U.S. stocks had declined steeply earlier in the morning, yet pared their losses after it was announced that an unprecedented 3.28 million workers filed for unemployment benefits—five times the previous record high.

But stocks opened higher and remained in the green for the entire session as some investors were already looking ahead to the likely passage of the largest fiscal stimulus package in the U.S. in recent memory.

Dow Starts a New Bull Market, Ending Its Shortest Bear Run
0:00 / 1:15

Dow Starts a New Bull Market, Ending Its Shortest Bear Run
Dow Starts a New Bull Market, Ending Its Shortest Bear Run
The Dow Jones Industrial Average has ended its shortest bear run and is now back in a bull market. WSJ’s Akane Otani explains how we got here. Photo: Angela Weiss/AFP via Getty Images
The Senate on Wednesday approved the relief plan, which would provide direct payments to Americans and loans to large and small companies, among other measures. The House is expected to consider the bill Friday. If approved, it would head to President Trump.

“Investors believe data like today will make it more likely that the House will pass the stimulus bill,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co. “The deeper and the worse the numbers are in the near term, the more possibility there is for a [fiscal] response, which powers the rebound on the other side.”

Gains were broad Thursday with all 11 sectors of the S&P 500 finishing the day higher. Dow heavyweight Boeing Com pany surged 14% on news that the stimulus package had set aside $17 billion for businesses deemed critical for national security, which many have interpreted to include the aerospace giant, which is a defense contractor.

Each S&P 500 stock’s change in price from Monday’s close through Thursday's close

-10
0%
20
40
60
80
Utilities
Technology
Real estate
Materials
Industrials
Health care
Financials
Energy
Consumerstaples
Consumerdiscretionary
Communicationservices
Darker shades indicate overlapping dots.
Source: FactSet

Many airlines also climbed after it became clear that they would receive relief. Alaska Air Group was among the large gainers in the S&P 500, rising 8.9%.

The S&P 500’s energy sector also continued to march higher. Marathon Oil surged 8.4%, Exxon Mobil edged up 4.1%, and Chevron gained more than 10%. Stocks in the sector had been particularly battered by weeks of market downturn, pushed lower, in part, by evidence that the pandemic is leading to an unprecedented decline in energy demand.

Still, oil prices slid Thursday. Brent crude, the global gauge of oil prices, dropped 3.8% to $26.34.

Despite widespread gains across equities Thursday, investors warned that the Dow’s rise into a bull market should be cautiously digested.

“It’s impressive in terms of percent from the bottom,” said Anwiti Bahuguna, head of multi-asset strategies at Columbia Threadneedle Investments. “But we still have a big hill to climb back to the old high.”

And, even as investors look ahead to the stimulus bill, there’s no guarantee that it will be enough to blunt the economic fallout from the coronavirus outbreak. U.S. cases of the virus now surpass 70,000 people, and more than 1,000 have died. State and local governments have ordered millions of Americans to stay home to stop the spread of the highly contagious virus, further exacerbating the U.S. economic dent.

Share-price and index performance, today
Source: FactSet

Boeing
Bank ofAmerica
Exxon Mobil
AmericanAirlines
S&P 500
0%
5
10
15

Federal Reserve Chairman Jerome Powell said Thursday morning that he expected economic activity to decline “pretty substantially” in the second quarter. Mr. Powell, speaking in a rare television interview on NBC’s “Today” show, added that the central bank is taking unprecedented action to help ensure economic activity can resume as soon as the coronavirus pandemic is under control.

Many economists have been revising their U.S. GDP projections, with some predicting that the U.S. economy could in the second quarter shrink far worse than it did during the Great Recession. Other market observers have cautioned that the U.S. stocks rally could likely be temporary—especially as more economic data emerges and the U.S. likely remains weeks away from having the coronavirus under control.

Analysts also expect a sharp decline in corporate earnings in the month ahead.

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“The market is showing a little bit of relief, but frankly, that doesn’t mean that it’s going to persist,” said Solita Marcelli, deputy chief investment officer for the Americas at UBS Global Wealth Management. “We still have a lot of things that are unknown.”

Investors moved into government bonds Thursday, causing the benchmark on the 10-year U.S. Treasury to retreat to 0.806%, from 0.854% Wednesday.

Outside of the U.S., the pan-continental Stoxx Europe 600 finished the day up 2.6%. Earlier, the European Central Bank “broke new ground,” said Florian Hense, an economist at Berenberg Bank in a note, after it gave itself more flexibility on its new €750 billion ($821 billion) bond-purchase program.

Meanwhile, most major stock markets in the Asia-Pacific region closed lower. Japan’s Nikkei 225 lost 4.5%. Singapore’s FTSE Straits Times Index shed less than 1% after the country forecast that the economy could contract by up to 4% in 2020 in its first full-year recession since 2001.


A woman takes a picture in front of a closed Department of Labor office in New York this week. Stocks rose Thursday despite U.S. jobless claims spiking.
Photo: angela weiss/Agence France-Presse/Getty Images

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U.S. to Take Stakes in Airlines in Exchange for Grants, Mnuchin Says
Plan emerged during last-minute negotiations over $2 trillion economic rescue package to address coronavirus crisis

By Siobhan Hughes, Alison Sider and Kate Davidson
Updated March 26, 2020 5:19 pm ET

Steven Mnuchin said last week that equity stakes could be part of an eventual coronavirus aid package.
Photo: Sarah Silbiger/Bloomberg News
WASHINGTON—Treasury Secretary Steven Mnuchin indicated that the U.S. government would take stakes in airlines in exchange for billions of dollars in direct grants to the companies, according to people familiar with the matter, as part of a $2 trillion economic rescue package.

He detailed his plans during last-minute negotiations when the aid to airlines emerged as a major legislative sticking point. Republicans had rejected providing cash grants to airlines, and an earlier version of the legislation would have provided $50 billion in loans and loan guarantees to passenger airlines and $8 billion to cargo airlines—but no direct aid.

Mr. Mnuchin has previously signaled such a move was on the table, saying last week that equity stakes could be part of the eventual aid package. While it wasn’t clear what form the investment would take, one option is a warrant that converts into equity. A warrant gives the buyer the option to buy shares at a certain price.

A Treasury spokesman didn’t immediately respond to a request for comment.

What’s in the Senate’s $2.1 Trillion Emergency Aid Bill


Airlines, cargo grants $32

Public transit $25

Loans to businesses

extended

deadlines

Airlines, cargo carriers $29

Sources: Preliminary legislative text; estimates
by aides, lawmakers and outside groups.
Airlines for America, the industry group for U.S. carriers, said the direct payroll grants would help airlines continue paying workers.

“We remain hopeful that the federal government will expeditiously release these funds with as few restrictions as possible to ensure airlines are able to utilize these provisions and meet our payroll,” the group said. Its statement didn’t address the issue of government taking stakes in companies.

Carriers have announced severe cutbacks in service amid sharp declines in passengers, and they have been trying to bolster liquidity in recent weeks by drawing down credit facilities and taking out new loans.

The version of the legislation passed by the Senate Wednesday night would provide $25 billion in loans and guarantees to passenger airlines, with the remaining $25 billion in the form of direct grants, meeting the requests of the airlines. Airlines had wanted outright grants, last week proposing a $50 billion assistance package, with half of that paid in grants to provide the cash that many carriers need right away to avoid furloughs and pay cuts.

The Senate bill details the forms of investment that the Treasury secretary might make in connection with the grants, listing warrants, options, preferred stock, debt securities, notes or other financial instruments to “provide appropriate compensation” to the federal government for providing financial assistance.

Industry and government officials said the Treasury Department could have leeway to tailor the form of its investments to individual carriers.

Analysts have said the government aid would likely help airlines avoid the worst outcomes for now. But they are still in a precarious position, depending on the duration of the coronavirus pandemic, how quickly passengers begin flying again and the extent to which the virus’s spread continues to bring new operational challenges.

“We remain concerned that in the absence of second-half demand recovery, airlines could still come to find that court-supervised restructurings are necessary,” J.P. Morgan analysts wrote in a client note Wednesday.

Contagion-driven staffing emergencies at air-traffic-control facilities could make it challenging to continue flying in parts of the country at times.

Air travel has dwindled as a patchwork of government restrictions and public-health recommendations have encouraged people to stay home. Many flights have taken off with just a handful of passengers, while thousands have been canceled due to lack of demand. Only 240,000 passengers passed through airport-security screening checkpoints Wednesday, down nearly 90% from a year ago, according to the Transportation Security Administration.

Airlines have been shrinking themselves to contend with reduced demand—offering employees the option to take temporary leave without pay, parking planes and retiring some types of aircraft earlier than scheduled. Top executives have also agreed to reduce or forgo salaries in many cases.

Confirmed cases
as of Mar 26, 2020
37,900
10
New York
37,877 cases

Confirmed deaths
as of Mar 26, 2020
400
10
New York
385 deaths

Source: Johns Hopkins Center for Systems Science and Engineering

Alaska Air Group Inc., for example, said Wednesday that it would cut flying by 70% in April and May. The airline is burning through some $14 million in cash daily, Chief Executive Brad Tilden said in a message to employees that was reviewed by The Wall Street Journal.

“We must move swiftly and courageously to reduce it, and to give us the best chance possible of waiting out this storm and capitalizing on any opportunities we see on the other side. This is the case even with the possible government aid that may flow to us,” he said. Mr. Tilden said in the message that Alaska should receive more than $2 billion through the government assistance outlined Wednesday.

Airlines continued to raise private finance themselves on Thursday, with Alaska Air announcing a new $425 million loan and United Continental Holdings Inc. borrowing another $500 million.

In exchange for the payroll grants, carriers must agree not to furlough, lay off or cut pay for employees until Sept. 30. Assistance also hinges on companies agreeing not to buy back shares or pay dividends, along with limits on executive compensation.

The package also allows the Transportation Department to direct airlines to keep operating specific flights so that rural communities don’t lose service and to support delivery of health-care-related cargo

Airline labor leaders had joined with carriers in pushing for the direct grants to support payroll in recent days, and portrayed their inclusion as a victory for front-line aviation workers. In the Senate package, the cargo airlines would receive $4 billion in grants and contractors $3 billion in grants.

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Mr. Mnuchin has said repeatedly that the assistance to industries provided by the bill doesn’t constitute a bailout, and that taxpayers will be protected.

“We will be doing things on market terms, and if we determine that market terms include equity, we have the ability to do that,” Mr. Mnuchin said Monday in an interview with Fox Business Network, when the negotiations were continuing. “If the taxpayers are putting money at risk, they should be properly compensated.”