April 29, 2020 / 6:26 PM / a month ago

US STOCKS-U.S. stocks rally on coronavirus drug hopes

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* Gilead’s COVID-19 treatment shows promise

* Fed leaves key interest rates near zero

* Boeing jumps on job cuts, plans to boost liquidity

* Q1 GDP shows steepest contraction in 11 years

* Indexes up: Dow 2.09%, S&P 500 2.54%, Nasdaq 3.33% (Updates to late afternoon, changes dateline, byline)

By Stephen Culp

NEW YORK, April 29 (Reuters) - Wall Street stock indexes surged on Wednesday as hopes for an effective COVID-19 treatment prompted a broad rally and helped investors look past bleak economic data.

Big tech companies returned to the lead, providing the biggest boost to all three major U.S. stock averages and pushing them closer to their all-time highs reached in February.

All are well within 20% of their record levels, with the tech-heavy Nasdaq now within 10% 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 on track for its sixth straight advance.

Drugmaker Gilead Sciences Inc 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 6.2%.

“There’s an anticipation of a potential return to normalcy, with states talking about procedures to slowly reopen cities and towns and get people spending again,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts.

“The market is a forward-looking vehicle and it’s starting to look up.”

U.S. Federal Reserve wrapped up its two-day monetary policy meeting, leaving key interest rates near zero and vowing to use a “full range” of its tools to aid the economy in the face of a pandemic that poses “considerable” medium term risks.

Stocks slightly trimmed their gains after the Fed’s statement.

“Words matter with the Fed, maybe now more than ever,” Keator added. “Because of the uncertainty out there, the Fed is one place markets can find certainty as to what they plan on doing and for how long.”

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

The Dow Jones Industrial Average rose 503.57 points, or 2.09%, to 24,605.12, the S&P 500 gained 72.69 points, or 2.54%, to 2,936.08 and the Nasdaq Composite added 286.46 points, or 3.33%, to 8,894.19.

Of the 11 major sectors in the S&P 500, nine were in the black, with energy companies enjoying the largest percentage gain.

Earnings season has hit full-stride, with 192 of the companies in the S&P 500 having reported. Of those, 64.6% have beaten consensus estimates, according to Refinitiv data.

In aggregate, first-quarter S&P 500 earnings are seen dropping 15.1 percent from a year ago, a stark reversal from the 6.3% annual growth forecast on Jan. 1, per Refinitiv.

Google parent Alphabet Inc jumped 9.0% after the company reported steady advertising sales and a 13% year-on-year revenue increase.

Boeing Co shares surged 7.8% after the planemaker announced it would shrink its workforce and production to contend with plunging demand.

Ride share company Lyft Inc plans to cut 17% of its workforce, according to a Reuters exclusive. Its shares were up 4.2%.

Results from Facebook Inc, Microsoft Corp and Tesla Inc are expected after the closing bell.

Advancing issues outnumbered declining ones on the NYSE by a 6.89-to-1 ratio; on Nasdaq, a 4.81-to-1 ratio favored advancers.

The S&P 500 posted 5 new 52-week highs and no new lows; the Nasdaq Composite recorded 38 new highs and no new lows. (Reporting by Stephen Culp Editing by Nick Zieminski)

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