Wall Street surges as Congress preps more stimulus and oil bounces back

(Reuters) – Wall Street surged on Wednesday as oil prices recovered some ground and Congress looked on course to seal nearly $500 billion more in aid to help small businesses ride out the coronavirus crisis.

U.S. crude and benchmark Brent prices edged higher after a collapse in the past two days, sending the S&P 500 energy index .SPNY up 3.5%.

All 11 S&P 500 sector indexes traded higher as the U.S. Senate unanimously approved the new relief package, adding to trillions of dollars in stimulus that have helped Wall Street rebound from its March lows.

The House of Representatives is expected to clear the bill on Thursday.

“The (stimulus) response times have been way faster than what you saw in 2008. What you’re seeing is the tail risk removal that stops the equity downturn and allows the market to actually look,” said Anik Sen, global head of equities at PineBridge Investments in New York.

The benchmark S&P 500 is still 17% below its February record high as state-wide shutdowns have sparked layoffs and crushed consumer spending, putting several industries at risk of collapse.

Estimates for U.S. jobless claims for the latest week ranged as high as 5.5 million, while a reading on April U.S. factory activity was likely to fall to levels last seen during the 2008 financial crisis. Both reports are due Thursday.

Analysts have drastically cut their S&P 500 earnings expectations for the first and second quarters and are now projecting a corporate recession for 2020, according to IBES data from Refinitiv.

A week after the big U.S. banks issued dismal 2020 forecasts, consumer discretionary and technology firms fared slightly better as the lockdown measures boosted demand for online streaming and home delivery of meals.

“I think this earnings season is really going to be a function of which companies and which industries are holding up … and are able to withstand the decline in this market and to ride it out,” said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.

Investors will also be paying close attention to capital allocation from companies, Perez added, “You have to have the cash to sustain and ride out to the other side.”

Burrito chain Mexican Grill Inc (CMG.N) jumped 11% after it reported soaring digital and home delivery sales and said it had enough cash and liquidity to get through the next year.

Netflix Inc (NFLX.O) more than doubled its own projections for new customers in the first quarter. However, its shares fell 2.3% as it forecast a weaker second half if the lockdown measures were to be lifted.

The Russell 2000 index of U.S. small-cap stocks rallied 1.3% but it remains down nearly 30% from its February high, reflecting smaller companies’ recent underperformance companied to Wall Street’s largest firms.

“Small caps and mid-caps still haven’t seen a recovery, and that tells me the economy is still in question,” warned Ben Philips, Chief Investment Officer of the EventShares ETF (PLCY.Z).

With volatility the new normal on Wall Street, at 2:20 pm ET, the Dow Jones Industrial Average .DJI was up 1.94% at 23,465.51 points, while the S&P 500 .SPX gained 2.26% to 2,798.35.

The Nasdaq Composite .IXIC added 2.79% to 8,493.40.

Advancing issues outnumbered declining ones on the NYSE by a 2.61-to-1 ratio; on Nasdaq, a 1.84-to-1 ratio favored advancers.

The S&P 500 posted 2 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 22 new highs and 13 new lows.

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