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A big second-day rally in North American stocks suddenly vanished by the close of trading Tuesday, undercut by another plunge in the price of oil and investor concerns that markets were recovering too quickly on only tentative signs of progress in the battle against the coronavirus.

The S&P 500 closed down 0.2 per cent, and the S&P/TSX Composite Index ended with a slight gain of 0.1 per cent. Both indexes were up as much as 3.5 per cent earlier in the day.

The market’s gains faded as the price of U.S. crude oil abruptly flipped from a gain to a steep loss of more than 9 per cent.

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It dampened what had been an ebullient day for markets worldwide, following up on Monday’s 7% surge for the S&P 500 and 5.1 per cent gain for the TSX on encouraging signs that the pandemic may be close to levelling off in some of the hardest-hit areas of the world.

Even though economists say a punishing recession is inevitable, investors this week have recently begun to look ahead to when economies will reopen from their medically induced coma. A peak in new infections would offer some clarity about how long the recession may last and how deep it will be.

Investors could then, finally, envision the other side of the economic shutdown, after authorities forced businesses to halt in hopes of slowing the spread of the virus. In the meantime, governments around the world are talking about pumping trillions of dollars more of aid for the economy.

Many professional investors say they’ve been wary of the recent upsurge and expect more volatility ahead. The S&P 500 has rallied nearly 19% since hitting a low on March 23, though it’s still down 21.5% from its record set in February. The TSX is still down more than 24 per cent from its record high.

“There’s no guarantee that the worst is behind us, yet traders believe that at least there is some short-term money to be made,” said Sam Stovall, chief investment strategist at CFRA.

Oil prices have been even more volatile than the stock market in recent weeks as demand has dried up for energy amid a global economy weakened by the coronavirus outbreak. Russia and Saudi Arabia have also been locked in a price war, refusing to cut production sharply even as the world is awash in excess oil.

President Donald Trump said last week that he hoped and expected the two sides could agree on production cutbacks, which helped prices spurt higher temporarily. But investors still aren’t convinced about a deal, and benchmark U.S. crude oil fell $2.45, or 9.4%, to settle at $23.63 per barrel.

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Earlier in the trading day, stock indexes in Europe and Asia climbed after China, the first country to lock down wide swaths of its economy to slow the spread of the virus, reported no new deaths over the past 24 hours.

Investors also see signals that the number of daily infections and deaths may be close to peaking or plateauing in Spain, Italy and New York. The number of daily deaths rose in New York, the centre of the U.S. outbreak, but other statistics were more encouraging, including the average number of people hospitalized each day. COVID-19 has already claimed at least 81,000 lives around the world.

More economic misery is also on the horizon. Economists expect a report on Thursday to show that 5 million Americans applied for unemployment benefits last week as layoffs sweep the country. That would bring the total to nearly 15 million over the past three weeks. Analysts also expect big companies in upcoming weeks to report their worst quarter of profit declines in more than a decade.

But central banks and governments are promising massive amounts of aid to prop up the economy.

Japan’s government on Tuesday formally announced a 108 trillion yen ($1 trillion) package for the world’s third-largest economy.

In the U.S., the White House is seeking an additional $250 billion for a program to help small businesses, which was part of the $2.2 trillion rescue package Congress approved last month.

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There is hope that clinical data on potential treatments for the new coronavirus could help sustain the market bounce, as investors look for signs that authorities may be able to stabilize the pandemic.

Highly anticipated data for a Gilead Sciences Inc experimental antiviral drug are expected later this month. Analysts are also awaiting results in the near-term for products already approved for other conditions from companies such as Roche Holding and Regeneron Pharmaceuticals.

While experts estimate an approved vaccine could be at least a year away, progress toward treatments that benefit some COVID-19 patients could help investors gauge when the epidemic could come under control and some economic activity might resume.

“The more we see positive clinical data, the more investors will be comforted in the fact that this is a transitory issue like all epidemics are,” said Art Hogan, chief market strategist at National Securities.

Reuters, Associated Press, Globe staff

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