NEW YORK (AP) — Stocks are surging on Wall Street Tuesday and joined a worldwide rally as optimism rose, for one day at least, that government officials and central banks are unleashing enough aid to ease the economic pain caused by the coronavirus outbreak.
The S&P 500 galloped more than seven per cent higher, and the Dow jumped more than 1,500 points in afternoon trading as a wave of buying interrupted what has been a brutal month of nearly nonstop selling. Despite the gains, investors were far from saying markets have hit bottom. Rallies nearly as big as this have punctuated the last few weeks, and none lasted more than a day.
Tuesday’s optimism was born in large part from signs that Congress and the White House are nearing an agreement on close to $2 trillion in aid for the economy. Investors have been frustrated waiting for the U.S. government to do what it can to help the economy, which is shutting down by the day. The Federal Reserve is doing nearly all it can, and it launched its latest round of extraordinary aid Monday.
“I don’t think there’s any more confidence in the fundamental outlook, but the fact that we’re making progress is good news,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “It’s sort of like, keep the patient alive in the emergency room so you can provide some treatment options.”
Markets jump to the upside at the open. pic.twitter.com/P3H4c9qcqS
— Richard Dettman (@rwdettman) March 24, 2020
The buying circled the world. South Korean stocks surged 8.6 per cent, Germany’s market jumped 11 per cent and Treasury yields rose in a sign that investors are feeling less fearful.
The market has seen rebounds like this before, only for them to wash out immediately. Since the market began selling off on Feb. 20, the S&P 500 has had six days where it’s risen, and all but one of them were big gains of more than four per cent. After them, stocks fell an average of five per cent the next day.
“One of the things to be careful about is thinking this will be the panacea or that this fiscal response will be sufficient,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.
Ultimately, investors say they need to see the number of new infections peak before markets can find a floor. The increasing spread is forcing companies to park airplanes, shut hotels and close restaurants to dine-in customers. Altogether, estimates suggest at least 10 per cent of the U.S. economy is shutting down, according to Rob Sharpe, head of investments and group chief investment officer at T. Rowe Price.
The S&P 500 was up 7.6 per cent as of 10 a.m. PT, If it stays that high, it would be the fifth-best day in the last 50 years. The Dow Jones Industrial Average rose 1,512 points, or 8.1 per cent, to 20,113 and the Nasdaq was up 5.8 per cent.
Economists are topping each other’s dire forecasts for how much the economy will shrink this spring due to the closures of businesses, and a growing number say a recession seems inevitable.
To support the economy while health experts work to corral the virus, the Federal Reserve on Monday pledged to buy as many Treasurys and mortgage-backed securities as it takes to keep lending markets working smoothly..
Investors are waiting for Congress and the White House to also do what they can. They debated through the weekend and Monday on a plan to send cash to households and help support the hard-hit travel industry, among other things. After negotiations dragged through the night, a Senate vote could come later Tuesday.
That helped travel-related stocks surge to the market’s biggest gains. Norwegian Cruise Lines was up more than 44 pr cent. MGM Resorts jumped nearly 39 per cent. American Airlines Group was up more than 35 per cent. All, though, remain 60 per cent or more below where they were last month.
Governments and central banks in other countries around the world are unveiling unprecedented levels of support for their economies in an attempt to limit the scale of the upcoming virus-related slump. Germany, a bastion of budgetary discipline, also approved a big fiscal boost.