Stocks end nearly flat after early rally vanishes

A rally on Wall Street early Thursday suddenly vanished, the latest example of the fragility of the hopes underpinning the stock market’s monthlong recovery.

The benchmark Standard & Poor’s 500 index jumped in the morning, brushing aside a report showing that 4.4 million U.S. workers filed for unemployment benefits last week. Investors were looking ahead, beyond the current economic misery, to the prospect of a reopening economy amid expectations that the coronavirus outbreak may be leveling off in areas around the world.

But the index’s gain, which topped out at 1.6%, vanished in a span of seconds following a discouraging report about Gilead Sciences’ possible treatment for COVID-19, the disease caused by the coronavirus. After that, the index flipped between gains and losses, ending the day down 0.1%.

It’s a microcosm of the extreme swings that have gripped markets for months as investors struggle to set prices for where corporate profits and the economy will be months into the future.

From its record high in February until its recent low a month ago, the S&P 500 skidded by one-third on expectations that severe economic pain was on the way. Since then, the index has roughly halved its losses on a series of tenuous hopes for the future — hope that a reopening economy will enable companies to increase profits again, hope that massive aid from the Federal Reserve and Congress can temper the economic pain and hope that treatments for COVID-19 may be on the way.

A report from the Financial Times on Thursday undercut that last hope. It said a potential antiviral drug for the virus flopped in a clinical trial, citing documents published accidentally by the World Health Organization.

Shares of Gilead Sciences flipped from a 3.3% gain to a 4.3% loss after the report.

The S&P 500 finished at 2,797.80, down 1.51 points. The Dow Jones industrial average ended with a gain of 39.44 points, or 0.2%, at 23,515.26. The Nasdaq composite slipped 0.63 points to 8,494.75.

“It should be expected — even as we are optimistic, and we see signs of progress in treatment, testing and vaccines — that there’s going to be some forward and some backsliding,” said Nela Richardson, an investment strategist at Edward Jones.

She said investors are still encouraged by signs of progress in the fight against the coronavirus, particularly in the lower number of fatalities and new cases in some areas.

“The risk is that these fundamentals that we’re seeing now — that are dastardly, just terrible and reflective of the economy really going into a sudden stop — last longer than what the markets currently anticipate,” she said. “That uncertainty will cause volatility, even if the overall trajectory in the market is positive.”

Among the dastardly numbers that arrived Thursday: Preliminary data on manufacturing and services activity in Europe and the United States came in even weaker than economists expected, as did a report on sales of new U.S. homes. The headliner, though, was the report showing 4.4 million U.S. workers filed for unemployment benefits last week. That brought the total over the last five weeks to 26 million, or roughly 1 in 6 U.S. workers.

Analysts said investors may have found some encouragement in that last week’s number of jobless applications was down from the prior week’s 5.2 million. Plus, investors were initially willing to look to past the dismal data because they already expected it.

”Numbers for the short term, when they’re reported, it’s almost like a sigh of relief that they aren’t higher,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

Las Vegas Sands shares jumped 12%, the largest gain in the S&P 500, after executives said travel restrictions in Macau, where the casino operator gets the bulk of its revenue, could begin to ease in May or June.

Energy stocks were strong as the price of crude oil — which got upended this week — rose for a second straight day. Apache, Devon Energy and Halliburton shares rose more than 8%, though all three also remain down at least 58% for the year.

U.S. crude oil for delivery in June rose 19.7% to $16.50 a barrel. That’s up from Monday, when it fell under $12, though it remains well below the roughly $60 level where it started the year. Brent crude, the international standard, rose 4.7% to $21.33 a barrel.

The yield on the 10-year Treasury slipped to 0.59% from 0.61%. Yields tend to fall when investors are downgrading their expectations for the economy and inflation ahead.