The Dow soared on Tuesday to its biggest one-day percentage gain since 1933, after U.S. lawmakers said they were close to a deal for an economic rescue package in response to the coronavirus outbreak, injecting optimism following the biggest selloff since the financial crisis.
All three main U.S. stock indexes rebounded strongly from Monday's brutal selloff as the coronavirus outbreak forced entire nations to shut down.
Senior Democrats and Republicans said they were close to a deal on a $2 trillion stimulus bill, aimed at providing financial aid to Americans out of work and help for distressed industries.
The expected legislation adds to aggressive action announced by the Federal Reserve in recent days, including purchase of corporate bonds and announcing that the U.S. central bank will make direct loans to companies.
King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco, said expectations on the stimulus bill were driving optimism on Wall Street, but said his firm was still waiting to buy back into the market.
"With all of this stimulus, we just need a catalyst to spark the fire," Lip said. "That spark will be a peaking of the cases, and when it starts to come down, I think that's when everything gets lit up."
Investors were also pleased after President Donald Trump said on Monday he was considering how to restart parts of business life when a 15-day shutdown ends next week, even as the highly contagious virus spreads rapidly and poorly equipped hospitals struggle with a wave of deadly cases.
A separate proposal in the U.S. House of Representatives to grant airlines and contractors a $40 billion bailout lifted the S&P 1500 airlines index by 15%.
The severity of the spread of COVID-19 and expectations of aggressive stimulus measures have whipsawed financial markets and ended Wall Street's 11-year bull run.
Boeing Co powered the Dow's gains, jumping nearly 21% after Chief Executive Dave Calhoun said the planemaker expected the 737 MAX jet to return to service by mid-year. Its shares have lost nearly two-thirds of their value so far in 2020.
Data on Monday showed U.S. business activity hit a record low in March, bolstering expert views that the economy was already in a recession.
Traders were still weighing the uncertainty of the path of the coronavirus outbreak.
"We don't know how long it's going to take to peak. We don't know how to treat it. We don't have a vaccine. So all of those uncertainties are causing a myriad of aftershocks," said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.
The Dow rose 2,112.98 points, its biggest point gain in history, or 11.4%, to 20,704.91. The S&P 500, which is much more important to most 401(k) accounts, rose 209.93, or 9.4%, to 2,447.33 for its third-biggest percentage gain since World War II. The Nasdaq composite jumped 557.18 points, or 8.1%, to 7,417.86.
The S&P energy index jumped 16.3%. The big banks index jumped about 13%, tracking an increase in U.S. government bond yields.
Just 11 S&P 500 stocks ended lower.
Advancing issues outnumbered declining ones on the NYSE by a 8.53-to-1 ratio; on Nasdaq, a 6.22-to-1 ratio favored advancers.
The S&P 500 posted no new 52-week highs and four new lows; the Nasdaq Composite recorded four new highs and 85 new lows.
Volume on U.S. exchanges was 15.3 billion shares, compared to the 15.9 billion-share average for the full session over the last 20 trading days.
WORLD MARKETS: STOCKS, GOLD SURGE ON NEW STIMULUS FROM FED, OTHERS
Financial markets rebounded sharply, with a measure of global equities headed for its biggest bounce since the crisis erupted a month ago, while the safe-haven dollar recoiled as investors welcomed unprecedented global stimulus efforts.
Investors hoped the U.S. Federal Reserve's offer of unlimited bond-buying would help avert a global depression with the help of other rescue packages, though it was not expected by itself to mitigate the devastating impact of the coronavirus.
The Fed's action had failed to persuade Wall Street on Monday, with losses of 2%-3% on major indexes. But the mood improved on Tuesday as other governments and central banks stepped in and Congress readied a $2 trillion stimulus package to limit the economic fallout from the fast-spreading pandemic.
U.S. gold futures climbed as much as 6.7% to $1,672.60 an ounce as the moves by the Fed and others eased the need for cash and slashed the demand for dollars.
"The Fed's measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis," said Vasileios Gkionakis, head of FX strategy at Lombard Odier.
U.S. and European stocks jumped 6% or more and the dollar index, a basket of major trading currencies, slid.
MSCI's gauge of stocks across the globe gained 7.00%, the largest single-day gain since equities tumbled from all-time highs a month ago.
The broad pan-European STOXX 600 index rose 8.40%, its strongest session since late-2008. The index is still down about 30% from a record peak hit in February.
German stocks jumped 11% and British blue chips added 9% as both bourses also posted their best sessions since the global financial crisis in 2008.
Europe's so-called fear gauge fell to 52.53, its lowest in nearly two weeks, after spiking to 12-year highs earlier this month.
Emerging market stocks rose 6.04%.
The Fed also will expand its mandate to corporate and municipal bonds and backstop a series of other measures that analysts estimate will deliver more than $4 trillion in loans to non-financial firms.
Other countries unveiled their own measures. South Korea's ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).
In China, mainland stocks posted their biggest gain in three weeks of almost 3%, while Japan's Nikkei soared 7%, its biggest daily gain in four years.
Still, investors remained wary, as the number of coronavirus infections topped 350,000 and new infections brought in from abroad rose in China.
Business activity collapsed from Australia and Japan to Western Europe at a record pace in March, as measures to contain the coronavirus hammered the world economy, and Japan said it was postponing the Olympics.
IHS Markit's flash composite Purchasing Managers' Index (PMI) for the euro zone, seen as a good gauge of economic health, plummeted to a record low of 31.4 in March, in the biggest one-month fall since the survey began in 1998.
With no resolution to the pandemic and not enough visibility into the depth of the economic downturn, it's too early to call the end to the market's rout, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
"The answer is still, 'you got to get it under control,'" Saluzzi said about the coronavirus. "Everybody keeps saying it's going to get worse before it gets better, so the markets are going to remain choppy and volatile."
The government and central bank financial support helped calm nerves in bond markets, where yields on two-year U.S. Treasuries hit their lowest since 2013.
The benchmark 10-year U.S. Treasury note fell 15/32 in price to yield 0.8148%.
Germany's 10-year yield was up 2 basis points on the day at -0.36%, compared with a 4 bps rise before the purchasing managers index (PMI) releases, all small moves when compared to record lows hit at -0.90% earlier in March.
ALL ABOUT THE ECONOMY
The impact of the virus on the global economy is evident in a series of growth forecast downgrades and advance readings of PMIs across the world's biggest economies.
German activity plunged to the lowest since the 2009 crisis, driven by a record services contraction, while French activity hit all-time lows. Japan posted its biggest-ever services fall.
However, the prospect of massive Fed funding pushed the greenback 0.26% lower against rivals, off three-year peaks , falling against the yen and sliding 1% versus the euro.
Brent futures rose 12 cents to settle at $27.15 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 65 cents to settle at $24.01.
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