Hope Springs Eternal

By Alex Eule |  Monday, April 6

'Zero Sail.' Equity investors have had an amazing ability to look on the bright side in recent weeks. Yes, stocks are down more than 20% from their February peaks, but given that most of the world is stuck in their homes and global commerce has been all but shut down, the market damage feels relatively contained. Today, just the possibility of a Covid-19 peak in some parts of the country and world had investors in a buying frenzy.

The Dow Jones Industrial Average soared 1,627 points, or 7.7%, its best day since March 24. The S&P 500 and Nasdaq Composite were also each up more than 7%. The hopeful news is that the rate of Covid-19 infections and deaths may finally be slowing. Stocks in the battered retail, travel, home building, and credit-card industries all saw moves of 15%-plus. Nordstrom was up 24%, MGM Resorts jumped 22%, and Boeing rose 19.4%.

Even the cruise lines rallied today, with Royal Caribbean soaring 21% and Carnival up 20%. There was rare good news for the beleaguered industry: Saudi Arabia's sovereign wealth fund now owns 43.5 million Carnival shares, an 8.2% stake in the company. The fund didn't own shares at the end of December, Barron's Ed Lin reports, suggesting that the purchases were made on Covid-19 weakness.

It's hard to imagine any kind of near-term improvement for the cruise industry, but a Wells Fargo analyst scripted a "Zero Sail" analysis in which the company has enough cash to stay afloat through November. Lawrence Strauss has more on that report on Barrons.com. 

The breakdown of winners and losers today is more evidence that investors are starting to look around the corner. The high-growth technology sector was the best performing industry of the day, up 8.5%, while consumer staples fared the worst, up 3.7%. 

Just 13 stocks in the S&P 500 finished in negative territory, including a few energy, airline, and consumer names. Two stay-at-home standouts also fell, with shares of Zoom Video down 4.1% and Peloton Interactive off 1.3%. 

Hedge funder Bill Ackman who had told CNBC in mid-March that "hell is coming," tweeted yesterday, "I am beginning to get optimistic." 

While investors may have been too negative at times, it's likely they're now too optimistic. The news remains terrible in New York and abroad, including from the U.K., where Prime Minister Boris Johnson is in intensive care, after being admitted to the hospital over the weekend because of Covid-19 symptoms.

Beyond tragic news about health, jobless claims are sure to be dreadful again this week, as well. But, for investors, the worse the news gets the closer we may be to this awful chapter coming to an end. And, for now at least, that means it's time to buy stocks again.