TSX and Dow close higher Monday on tentative signs of progress in COVID-19 battle

Stocks around the world jumped Monday after some of the hardest-hit areas offered sparks of hope that the worst of the coronavirus outbreak may be on the horizon.

U.S. stocks were up more than 7 per cent on Monday, accelerating through the day and following up on gains that were nearly as big in Europe and Asia. In another sign that investors are feeling more optimistic about the economy's path, the yield on the 10-year Treasury rose toward its first gain in four days.

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The TSX's benchmark index closedup 654points or more than five per cent.

New coronavirus infections and deaths are showing signs of slowing in Italy and Spain. The centre of the U.S. outbreak, New York, also reported a dip in the number of daily deaths, though authorities warned it's too early to tell whether it's just a blip or the start of a trend. That was enough to launch stocks higher, even though the U.S. is still bracing for a surge of upcoming deaths due to COVID-19.

"We're running on raw optimism, maybe that's the best way to put it," said Randy Frederick, vice-president of trading and derivatives at Schwab Center for Financial Research.

Investors have been waiting anxiously for a glimmer of hope that the rate of new infections may hit its peak, which would give some clarity about how long the upcoming recession will last and how deep it will be. Until then, markets have been grasping at guesses about how long businesses will remain shut down, layoffs will soar and flights remain cancelled due to measures meant to slow the spread of the virus.

That's why the number of infections and deaths will likely dominate markets more than anything else, particularly this upcoming week, which is relatively light on economic reports, Frederick said.

"The virus is not everything, it's the only thing, and nothing else really matters," he said.

The S&P 500 climbed 175.03, or 7 per cent, to 2,663.68, and nearly all the stocks in the index were higher. It more than recovered all its losses from the prior week, when the government reported a record number of layoffs sweeping the economy.

The Dow Jones Industrial Average shot up 1,627.46 points, or 7.7 per cent, to 22,679.99, and the Nasdaq rose 540.15, or 7.3 per cent, to 7,913.24.

"Hundreds of people are passing away each day from the pandemic, but less so than previous days, giving markets hope that the lockdown measures are finally starting to prove effective," Jeffrey Halley of Oanda said in a commentary.

"Like the rest of the world, financial markets are searching for any slivers of hope," he said.

The S&P 500 is still down more than 22 per centsince its record set in February, but the losses have been slowing since Washington promised massive amounts of aid to prop up the economy.

"Since this is a public health crisis, the response has been extreme," Morgan Stanley strategists wrote in a report. "There are literally no governors on the amount of monetary or fiscal stimulus that will be used in this fight."

Stocks in Asia and Europe higher too

In Japan, the prime minister said Monday that he's preparing to announce a 108 trillion yen ($1 trillion US) package to bolster the world's third-largest economy. It would be Japan's largest-ever package for the economy and nearly twice as much as expected.

Japan's economy was already shrinking late last year before the outbreak forced the global economy into a protective coma induced by health authorities.

The announcement pushed Japan's Nikkei 225 index to surge 4.2 per cent. Elsewhere in Asia, South Kora's Kospi jumped 3.9 per cent, and Hong Kong's Hang Seng rose 2.2 per cent

In Europe, Germany's DAX returned 4.9 per centand France's CAC 40 jumped 3.8 per cent. The FTSE 100 in London rose 2.4 per cent.

The yield on the 10-year Treasury yield rose to 0.66 per centfrom 0.58 per centlate Friday. Yields tend to rise when investors are raising their expectations for economic growth and inflation.

Crude oil fell, giving up some of its huge gains from the prior week when expectations rose that Saudi Arabia and Russia may cut back on some of their production.

Demand for oil has plummeted due to the weakening economy, and any cutback in production would help prop up its price. A meeting between OPEC, Russia and other producers initially planned for Monday, though, was reportedly pushed back to Thursday.

BenchmarkU.S. crude fell $1.01 to $27.33 per barrel. Brent crude, the international standard, lost $1.09, or 3.2 per cent, to $33.02 per barrel.