STOCKS SWING HIGHER
Losses from day earlier recouped as investors are pleased about responses to coronavirus, Biden’s resurgence
The Dow soared more than 1,100 points, or 4.5 percent, Wednesday as governments and central banks around the globe took more aggressive measures to fight the virus outbreak and its effects on the economy.
The gains more than recouped the market’s big losses from a day earlier as Wall Street’s wild, virusfueled swings extend into a third week.
Stocks rose sharply from the getgo, led by big gains for health care stocks after Joe Biden solidified his contender status for the Democratic presidential nomination. Investors see him as a more businessfriendly alternative to Bernie Sanders.
The rally’s momentum accelerated around midday after House and Senate leadership reached a deal on a bipartisan $8.3 billion bill to battle the coronavirus outbreak. The measure’s funds would go toward research into a vaccine, improved tests and drugs to treat infected people.
Investors are also anticipating other central banks will follow up on the Federal Reserve’s surprise move Tuesday to slash interest rates by half a percentage point in hopes of protecting the economy from the economic fallout of a fastspreading virus. Canada’s central bank cut rates on Wednesday, also by half a percentage point and citing the virus’ effect.
“The fact that you get an $8 billion bill, that’s money that will be spent, hopefully, on something that really will have an impact on mitigating the effects on the economy,”
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said Tom Martin, senior portfolio manager with Globalt Investments.
Some measures of fear in the market eased. Treasury yields rose but were still near record lows in a sign that the bond market remains concerned about the economic pain possible from the fast-spreading virus. Companies around the world are already saying the virus is sapping earnings due to supply chain disruptions and weaker sales, with General Electric becoming the latest to warn its investors.
Even though many investors say they know lower interest rates will not halt the spread of the virus, they want to see central banks and other authorities do what they can to lessen the damage. The S&P 500 sank 2.8 percent on Tuesday after a brief relief rally triggered by the Fed’s rate cut fizzled.
“Monetary policy can only take us so far, but at least it’s a step,” said Jack Ablin, chief investment officer at Cresset. “Investors will take comfort in coordinated central bank action. I take comfort in knowing this isn’t the plague, we’ll eventually get through this.”
The Bank of England has a meeting on March 26 on interest rates. The European Central Bank and others around the world have already cut rates below zero, meanwhile, which limits their monetary policy firepower. But economists say they could make other moves, such as freeing up banks to lend more.
Health care stocks in the S&P 500 jumped 5.8 percent for the biggest gain among the 11 sectors that make up the index. Unitedhealth Group jumped 10.7 percent, Cigna climbed 10.7 percent, and Anthem soared 15.6 percent, the biggest gainer in the S&P 500.
A Biden nomination would be more welcome on Wall Street than a nod for Sanders, who is campaigning on a proposal to enact “Medicare For All.”
“It’s probably a trend toward more of the same in terms of the market and the regulatory and business environment,” said Ablin. “I don’t think investors are looking for revolution.”
Markets have been on edge for two weeks, with the S&P 500 down 7.6 percent from its record on Feb. 19, amid worries about how much economic damage the coronavirus will do. The big swings in recent days will likely continue until investors get a sense of what the worst-case scenario really is in the virus outbreak. They need to see the number of new infections at least slow its acceleration, analysts say.
Indexes jumped on Monday, and the Dow had its best day in more than a decade on rising anticipation for coordinated support from the Fed and other central banks. That followed a dismal week that erased gains for 2020.
Choe and Veiga write for The Associated Press.