Dow notches its best day since 1933 as Congress and White House near $2-trillion virus stim­u­lus deal.

Los Angeles Times - - BUSINESS - Associated press

The Dow Jones in­dus­trial av­er­age surged Tues­day, post­ing its best day since 1933, as Congress and the White House neared a deal to in­ject nearly $2 trillion of aid into the coro­n­avirus-rav­aged econ­omy.

The Dow leaped 11.4%, while the more closely fol­lowed Stan­dard & Poor’s 500 in­dex jumped 9.4%, as a wave of buy­ing around the world in­ter­rupted what has been a bru­tal month of nearly non­stop sell­ing. In­vestors re­leased some frus­tra­tion that had pent up over days of watch­ing the Se­nate stale­mate over the cru­cial res­cue pack­age.

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. Econ­o­mists and in­vestors are still ex­pect­ing to see some dire eco­nomic num­bers in the days and weeks ahead.

“To­day was a good day, but we would not nec­es­sar­ily see this as turn­around time,” said Adam Taback, chief in­vest­ment of­fi­cer at Wells Fargo Pri­vate Bank.

Democrats and Repub­li­cans said Tues­day that they were close to agree­ing on a mas­sive eco­nomic res­cue pack­age, which will in­clude pay­ments to U.S. house­holds and aid for small busi­nesses and the travel in­dus­try, among other things.

In­vestors were im­plor­ing Congress to act, par­tic­u­larly as the Fed­eral Re­serve has done nearly all it can to sus­tain mar­kets, in­clud­ing its lat­est round of ex­tra­or­di­nary aid launched Mon­day.

“It’s sort of like, keep the pa­tient alive in the emer­gency room so you can pro­vide some treat­ment op­tions,” said Katie Nixon, chief in­vest­ment of­fi­cer at North­ern Trust Wealth Man­age­ment.

The Dow rose 2,112.98 points to 20,704.91.

The S&P 500, which is much more im­por­tant to most 401(k) ac­counts, rose 209.93 points to 2,447.33, its third-big­gest gain since World War II. The Nas­daq com­pos­ite jumped 557.18 points, or 8.1%, to 7,417.86.

The buy­ing cir­cled the world. South Korean stocks surged 8.6%, and Ger­many’s mar­ket jumped 11%. U.S. Trea­sury yields rose, 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 stocks sell-off be­gan Feb. 20, the S&P 500 has had six days when it’s risen, and all but one of them were big gains of more than 4%. Af­ter them, stocks fell an av­er­age of 5% 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% of the U.S. econ­omy is shut­ting down, said Rob Sharpe, head of in­vest­ments and group chief in­vest­ment of­fi­cer at T. Rowe Price.

Pres­i­dent Trump said Tues­day dur­ing a Fox News vir­tual town hall that he hopes to “open up ” the econ­omy by Easter. An­a­lysts said the pro­nounce­ment wasn’t a con­trib­u­tor to the day’s huge rally, at­tribut­ing the stocks’ gains mostly to the stim­u­lus hopes.

Econ­o­mists are top­ping one an­other’s dire fore­casts for how much the econ­omy will shrink this spring be­cause of the clo­sures of busi­nesses, and a grow­ing num­ber say a re­ces­sion seems in­evitable or may al­ready have be­gun.

Some of the sec­tors hard­est hit by the clo­sures, though, led the way higher Tues­day as ex­pec­ta­tions rose for in­com­ing aid from the U.S. gov­ern­ment.

Nor­we­gian Cruise Line, MGM Re­sorts and Amer­i­can Air­lines Group were all up at least 33%.

En­ergy com­pa­nies and banks were also strong, though all re­main well be­low where they were a month ago.

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 virus­re­lated slump. Ger­many, a bas­tion of bud­getary dis­ci­pline, also ap­proved a big fis­cal boost.

The gains came even as the first re­ports ar­rived show­ing how badly the out­break is hit­ting the global econ­omy.

In the United States, a pre­lim­i­nary read­ing on busi­ness ac­tiv­ity in March showed the steep­est con­trac­tion on record, go­ing back to 2009. Re­ports were also gloomy for Europe.

“Ev­ery­one was pre­pared for a set of shock­ers, and that is pre­cisely what we got, but they are not a sur­prise,” said Chris Beauchamp, chief mar­ket an­a­lyst at IG. “It is at times like this that the mar­ket’s propen­sity to look for­ward is demon­strated most ef­fec­tively.”

More gloomy data are nearly as­suredly on the way. On Thurs­day, econ­o­mists ex­pect a re­port to show the num­ber of Amer­i­cans ap­ply­ing for job­less claims eas­ily set a record last week. Some say the num­ber could far ex­ceed 1 mil­lion, amid a wave of lay­offs, top­ping the record of 695,000 set in 1982.

Help­ing to lift sentiment in mar­kets is news that China is pre­par­ing to lift the lock­down in Wuhan, the epi­cen­ter of the out­break, and that Italy re­ported a re­duc­tion in the num­ber of new cases and coro­n­avirus-re­lated deaths.

“It’s still early days, of course — per­haps in­vestors can start to en­vis­age life be­yond the coro­n­avirus,” said Craig Er­lam, se­nior mar­ket an­a­lyst at Oanda Europe. “That could make stocks look a lit­tle more at­trac­tive, al­though any­one jump­ing back in now will need to have nerves of steel.”

De­spite Tues­day’s big gains, it’s no time to get com­pla­cent, Wells Fargo’s Taback said.

“We would cau­tion that the dan­ger is not all be­hind us at this point,” he said. “We still have not seen num­bers that give us an in­di­ca­tion of just how bad things are.”

Luiz Roberto Lima Pa­cific Press/LightRocke­t

A STATUE near the New York Stock Ex­change sports a mask. De­spite stocks’ huge gains Tues­day, in­vestors were far from say­ing mar­kets have hit bot­tom.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.