Drug Hopes Boost US Stocks Despite GDP Fall

US stocks surged on Wednesday as hopes for an effective Covid-19 treatment prompted a broad rally and helped investors shrug off bleak GDP data and words of warning from Federal Reserve Chair Jerome Powell.

Big tech companies provided the biggest lift to the S&P 500 and the Nasdaq, and pushed all three major US stock averages closer to their all-time highs reached in February.

All are well within 20 per cent of their record levels, with the tech-heavy Nasdaq now within 10 per cent of its high.

Smaller companies, which stand to benefit more from restrictions being lifted on a state-by-state basis, continue to outperform their larger counterparts, with the Russell 2000 registering its sixth straight advance.

Drugmaker Gilead Sciences announced that its drug remdesivir is showing promise as an effective Covid-19 treatment, giving a boost to the broader market and sending its shares up 5.7 per cent.

The US economy suffered its sharpest decline in 11 years, with first-quarter GDP contracting at a 4.8 per cent quarterly annualised rate according to the Commerce Department, marking the end of the longest US economic expansion on record.

Many believe the worst is yet to come.

At the conclusion of its two-day monetary policy meeting, the Fed left key interest rates near zero and Powell warned the economy will drop at an "unprecedented rate" in the current quarter.

But Powell also said the economy will pick up as restrictions are lifted and vowed the central bank would continue to support the recovery.

The Dow Jones Industrial Average rose 532 points, or 2.21 per cent, to 24,634, the S&P 500 gained 76 points, or 2.66 per cent, to 2,940 and the Nasdaq Composite added 307 points, or 3.57 per cent, to 8,915.

Facebook rose about 8 per cent, whiles shares of both Microsoft and Tesla gained nearly 2 per cent in after-market trading following their earnings reports. (Reuters)