DOW BOUNCES BACK
Surges as banks plan to drop rates
The Dow Jones Industrial Average soared nearly 1,300 points Monday as stocks roared back from a seven-day rout on hopes that central banks will take action to shield the global economy from the effects of the coronavirus outbreak.
The huge gains clawed back some of the ground lost in a massive sell-off that gave stocks their worst week since the financial crisis of 2008.
Technology companies led the broad gains, which gave the Dow its biggest-ever point gain and biggest percentage increase since March 2009. The S&P 500 index jumped 4.6%, its best day since December 2018. European benchmarks were mostly higher, and Asian markets rose broadly.
Bond prices fell, pushing yields higher after having touched another record low earlier in the day. The yield on the 10-year Treasury note rose to 1.15% from 1.12% late Friday.
Investors are increasingly anticipating that the Federal Reserve and other central banks around the world will lower interest rates or take other steps to shield the global economy from the effects of the outbreak.
“Investors have convinced themselves that global central banks will likely be even more accomodative in order to short-circuit any psychological damage,” said Sam Stovall, chief investment strategist at CFRA.
Bill Nelson, of the Bank Policy Institute and a former Fed economist, said the Fed and other major central banks, including China’s, could announce coordinated rate cuts by Wednesday. The cut would at least be a half-point and perhaps even three-quarters, he said.
“The only way to get a positive market reaction is to deliver more than expected,” he said.
The International Monetary Fund and World Bank are ready to help countries affected by the coronavirus through their emergency lending programs and other tools.
“We will use our available instruments to the fullest extent possible,” the IMF managing director, Kristalina Georgieva, and World Bank President David Malpass said in a joint statement. “International cooperation is essential.”
The Federal Reserve and the Bank of Japan also promised to act if necessary. Traders have priced in a 100% probability that the Fed will cut rates by a half-percentage point during or before its March meeting.