Bank Stocks Lead Wall Street Recovery

Stocks finish higher on Thursday, but downside risks remain.

The Dow and broader U.S. stock market stabilized after a rough open on Thursday, as investors continued to monitor the economic impact of Covid-19.

The Dow Jones Industrial Average (DIA) erased a 450-point loss on Thursday. The benchmark index closed up 377.37 points, or 1.6%, to 23,625.34.

The broad S&P 500 Index (SPY) of large-cap stocks gained 1.2% to close at 2,852.50. Financials stocks were the top performers, followed by information technology, materials and health care companies.

Meanwhile, the technology-focused Nasdaq Composite Index (QQQ) rose 0.9% to close at 8,943.72.

A measure of implied volatility known as the CBOE VIX (VXX) rose sharply at the start of trading before backtracking later in the session. The so-called “investor fear index” peaked at 39.28 on a scale of 1-100 where 20 represents the historic average. It would eventually settle down 5.5% at 33.33.

In economic data, U.S. jobless claims rose by nearly 3 million for the week ended May 9, bringing the eight-week total to more than 36.5 million, the Department of Labor reported. The U.S. economy lost 20.5 million jobs for all of April as unemployment surged to a postwar high.

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The Final Word: Stocks face significant downside risks as government economists begin to quantify the effects of Covid-19. According to the Atlanta Federal Reserve Bank, U.S. gross domestic product (GDP) is on track to decline 34.9% in the second quarter.