The Dow Jones rallied nearly 500 points on Wednesday as risk-on gripped the stock market.

Helping fuel the Dow’s rally was a slew of positive economic data and central bank stimulus.

Despite Wall Street’s complacency, the coronavirus chaos still grips China with major economic fallout likely inevitable.

The Dow Jones rocketed past 29,000 on Wednesday as Wall Street enjoyed some robust U.S. data and gambled for the best on the coronavirus outbreak.

Adding to the positive mood for the Dow, the European Central Bank predicted that the impact of the epidemic will be limited. Despite confidence in financial markets, plenty of evidence is surfacing that the crisis could be worse than the official data suggest.

Dow Jones Soars on Upbeat U.S. Data & Coronavirus Denial

It was a stellar day for the major U.S. stock market indices, but this time it was the Dow Jones Industrial Average leading the way.

The Dow surged 497.23 points or 1.73% to 29,304.86.

The S&P 500 was close behind with a 1.21% upswing.

The Nasdaq (+0.59%) brought up the rear after Tesla stock crashed almost 20% following a parabolic rally.

Commodities rallied along with stocks. Oil prices exploded over 3% higher, lending some considerable support to risk sentiment.

The enthusiasm spread throughout other markets, as the price of gold and other metals rose in unison.

Dow Relishes Upbeat ADP Employment Report

Helping boost the Dow, U.S. economic data came in strong on Wednesday. ADP employment, ISM non-manufacturing, and U.S. services PMI all exceeded expectations.

Offering a note of caution, James Knightley from ING warned that things might not be quite as rosy as they appear and that ADP figures aren’t always great at predicting the government’s headline payrolls figure.

He wrote:

We would caution that the ADP hasn’t got a great history in predicting the official payrolls figure (due Friday). For example, ADP significantly undershot the official payrolls number throughout much of late 2019. We are still going for 150,000 BLS payrolls on Friday given the employment components of the non-manufacturing index slipped back and the manufacturing survey remains firmly in contraction territory.

Along with positive data came the expected liquidity bomb from the Fed.

It wasn’t as large as on Tuesday, but it was still around $50 billion and mixed with the stimulus China is using to support its financial markets.

If this wasn’t enough, Europe’s central bank downplayed coronavirus fears. ECB Chief Economist Phillip Lane said:

The history of (past epidemics) has been that there could be a significant short-term effect of events like these, but no long-lasting effect.

Don’t Write Off Coronavirus Yet

Unfortunately for the Dow Jones, every single one of the positives mentioned above could already be crumbling in the background.

Macro data releases haven’t yet had to absorb the full brunt of the coronavirus outbreak, and by all accounts, the impact on China could be unprecedented.

Yichang, another city in epicenter #Hubei conducted citywide disinfectant to contain the spread of #coronavirus tonight. The city, about 400-kilometer away from #Wuhan, has recorded over 400 confirmed cases as of Tuesday. pic.twitter.com/jYtx0Obe4i — Global Times (@globaltimesnews) February 4, 2020

Videos of what appears to be the mass spraying of disinfectant, as well as a report that Tencent allegedly leaked data showing the outbreak is far worse than China’s government claims, hint that the coronavirus epidemic will remain a simmering threat to the Dow moving forward.

Additionally, the World Health Organization poured cold water on the rumors of a vaccine breakthrough. The WHO is seeking $675 million in funding to help fight the outbreak.

Dow Stocks: Boeing Booms & Big Oil Makes a Comeback

The 500 point move in the Dow 30 was supported by a rally in one of the index’s most heavily weighted stocks. Boeing (NYSE: BA) was an attractive target for bargain hunters, given its 737 MAX beleaguered valuation.

Also fueling the move in the Dow Jones was a big comeback for Exxon Mobil, which soared 4.5% in line with the crude oil rally. Fellow energy stock Chevron was up over 3%.

Apple (NASDAQ: AAPL) edged 1.1% higher to underperform its blue-chip peers. IBM fared much better, rising 5.6%.

Disney (NYSE: DIS) limped 2% lower after its earnings report failed to update guidance for Disney+.