Shares surged Friday in Asia after China reported economic data that, while bleak, was better than expected.
The strong open followed an overnight rally on Wall Street powered by buying of Amazon, health care stocks and other market niches that are thriving in the coronavirus crunch.
China reported its economy contracted 6.8% in January-March as the country battled the coronavirus. That is the worst performance since at least the late 1970s.
It's also not as bad as the double-digit declines some analysts had forecast, though the latest numbers suggest the recovery will be a slow one.
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“The March data add to broader signs that China’s economy is past the worst. But the recovery will probably continue to underwhelm. Indeed, the high frequency indicators we track suggest that, after an initial bounce as containment measures were eased, the recovery in activity has since slowed to a crawl," Julian Evans-Pritchard of Capital Economics said in a commentary.
Japan's Nikkei 225 index jumped 2.6% to 19,788.35 and the Hang Seng in Hong Kong advanced 2.5% to 24,598.37. The Shanghai Composite index gained 0.9% to 2,846.27, while Australia's S&P ASX 200 rose 2.4% to 5,547.80. South Korea's Kospi surged 3.5% to 1,921.71 despite the release of data showing the country lost 195,000 jobs in March from a year earlier, ending a decade-long run in payroll gains.
Other markets in Asia also advanced.
U.S. futures were higher, with the contract for the S&P 500 up 3.3% while that for the Dow industrials gained 3.6%.
Overnight, the S&P 500 rose 0.6% after flipping between small gains and losses following a government report that 5.2 million Americans filed for unemployment benefits last week. That brought the total for the last month to roughly 22 million.
But even in this new stay-at-home, increasingly jobless economy, some businesses are making out as clear winners, and gains for Amazon, health care companies and stocks in other pockets of the market kept the rally on track.
“We know the numbers are not going to be good, but companies can show they’ve taken steps to stop the cash drain or that they’ve positioned themselves well,” said Sal Bruno, chief investment officer at IndexIQ.
Amazon, Dollar General and Walmart all closed at record highs as people stock up on staples. Netflix also reached an all-time high as people spend more time than ever at home, while health care stocks in the S&P 500 rose 2.2% for the biggest gain among the 11 sectors that make up the index.
As a sector, financial stocks weighed heaviest on the market with banks continuing their weeklong slide. Worries are high that business-shutdown orders — and the punishing sweep of layoffs they’re causing — will force households and businesses to default on billions of dollars of loans. JPMorgan Chase lost 3.8%, and Citigroup slid 5.5%.
Energy companies and owners of shopping malls were also hard hit as people stay at home amid efforts to slow the spread of the virus. Simon Property Group lost 13.3%, and Occidental Petroleum fell 10.4%.
Analysts see the separation of winners and losers as an encouraging sign for the market. Earlier in the sell-off, fears about the impending recession pulled the plug for stocks across sectors.
“We had a market that was dotted with indiscriminate selling,” said Quincy Krosby, chief market strategist at Prudential Financial. “Now you have a differentiation within the market, which indicates a healthier backdrop.”
The S&P 500 rose 16.19 points to 2,799.55. The Dow Jones Industrial Average added 0.1% to 23,537.68, the Nasdaq jumped 1.7% to 8,532.36 and the Russell 2000 index of smaller stocks slumped 0.5% to 1,178.09.
White House guidelines outlining a phased approach to reopening businesses, schools and other areas of life have hinted at light at the end of the shutdown tunnel.
Some optimistic investors are focusing on the massive aid for the economy promised by the Federal Reserve and the U.S government. They also point to recent signs that the outbreak may be leveling off in some of the world’s hardest-hit areas.
The dueling sentiments have helped the S&P 500 nearly halve its loss since falling from its record high in mid-February. Stocks were down by nearly 34% in late March, but a recent rally has trimmed the loss to roughly 17%.
Ultimately, many professional investors say they expect the market to remain volatile until the worst of the outbreak passes.
“This is a consumer-led economy,” said Prudential’s Krosby. “The question is: At what point does the consumer feel comfortable enough to begin even a quasi-normal life outside their homes?”
Treasury yields fell again and remain extremely low, though, which shows how pessimistic investors are about the economy’s prospects.
The yield on the 10-year Treasury fell to 0.60% on Thursday but was at 0.68% by early Friday. Yields fall when bond prices rise. Investors tend to bid up Treasurys when they’re worried about the economy.
Oil prices were holding steady. Benchmark U.S. crude gained 6 cents to $19.93 per barrel in electronic trading on the New York Mercantile Exchange. It was unchanged, at $19.87 per barrel, on Thursday. Brent crude, the international standard for oil prices, gained 57 cents to $28.39 per barrel.
The U.S. dollar fetched 107.69 Japanese yen, down from 107.92 on Thursday. The euro strengthened to $1.0870 from $1.0839.
AP Business writers Stan Choe, Damian J. Troise and Alex Veiga contributed.