While economic slowdown has been a real concern as the Wuhan Coronavirus spreads, there was no sign of concern on Wall Street this week as the Dow Jones Industrial Average (NYSE: DIA) and the S&P 500 (NYSE: SPY) posted considerable gains.
The Dow rallied on Tuesday, thanks to the superb performance of companies like Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL). During trading, Microsoft and Apple's stocks both rose around 3.1% to help lead the DJIA to a 480-point jump. The tech firms were joined by Caterpillar (NYSE: CAT), Nike (NYSE: NKE), and Dow Inc (NYSE: DOW). The Nasdaq Composite (NASDAQ: IXIC) saw some gains but fell short of the Dow and S&P's performance, largely due to a sudden drop in Tesla (NASDAQ: TSLA) stock.
Tesla's drop is largely attributed to words of caution coming from Wall Street analysts, who warned investors that despite Tesla's incredible performance, there remains a credible risk for the company to crash in value. Barclays analyst Brian Johnson called to mind the rise and fall of Qualcomm (NASDAQ: QCOM) over the course of 1999, warning that Tesla's performance may be in a "bubble" and is liable to burst at any moment.
The trend continued Wednesday with the Dow, S&P, and Nasdaq Composite (NYSE: QQQ), all posting considerable gains once again. The Dow posted a gain of 483 points by the end of trading, while the S&P had erased its losses that came as a result of Coronavirus fears. The spike in U.S. indices is reflective of rebounding confidence by investors as some good news of efforts to combat the Coronavirus came from China. Researchers at Zhejiang University reported early on Wednesday that they had tested a drug that appeared to be effective in treating Coronavirus patients, which is likely part of the reason confidence has been restored somewhat on Wall Street. However, the World Health Organization has warned that currently, there are "no known effective therapeutics against [Coronavirus]."
Controlling the number of new cases of Coronavirus is essential in limited both the spread of the virus and economic blowback. Much like the SARS outbreak of the early 2000s, once containment efforts begin to become more effective and new cases fall off, the global economy will begin to recover, even if the virus is not entirely contained or eradicated.