Big re­bound for stock mar­ket

San Francisco Chronicle Late Edition - - FRONT PAGE - By Stan Choe, Damian J. Troise and Alex Veiga

The Dow has its best day since 1933 on news Congress is close to agree­ing on a stim­u­lus pack­age.

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

The Dow burst 11.4% higher, while the more closely fol­lowed S&P 500 index leaped 9.4% as a wave of buy­ing around the world 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 past few weeks, and none lasted more than a day.

Both Democrats and Repub­li­cans said Tuesday they are 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. A vote in the Se­nate could come later Tuesday or Wed­nes­day.

In­vestors have been wait­ing in frus­tra­tion for such aid, par­tic­u­larly as the Fed­eral Re­serve has done nearly all it can to sus­tain mar­kets, in

clud­ing its lat­est round of ex­tra­or­di­nary aid that it adopted 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.”

The Dow rose 2,112.98 points, its big­gest point gain in his­tory, 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 third­big­gest per­cent­age 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 were up 8.6%, Germany’s mar­ket jumped 11%, 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 stocks be­gan sell­ing off on Feb. 20, the S&P 500 has had six days where it closed in pos­i­tive ter­ri­tory, and all but one of them were gains of more than 4%. 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 dinein cus­tomers.

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, which was mostly due to the stim­u­lus hopes.

Economists are top­ping each other’s dire fore­casts for how much the econ­omy will shrink this spring be­cause of busi­ness clo­sures, and a grow­ing num­ber say that a re­ces­sion seems in­evitable.

Some of the mar­ket’s ar­eas hard­est hit by the clo­sures, though, led the way higher Tuesday as ex­pec­ta­tions rose for aid from the fed­eral govern­ment.

Nor­we­gian Cruise Lines, MGM Re­sorts and Amer­i­can Air­lines 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 coun­tries around the world are un­veil­ing un­prece­dented lev­els of sup­port for their economies in an at­tempt to limit the scale of the ex­pected 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 dour data is nearly as­suredly on the way. Economists ex­pect a Thurs­day re­port to show the num­ber of Amer­i­cans ap­ply­ing for job­less claims eas­ily set a record last week. Some say the num­ber could be way be­yond 1 mil­lion, amid a wave of lay­offs, top­ping the prior record of 695,000 set in 1982.

Help­ing to lift sen­ti­ment in mar­kets is news from China that it is pre­par­ing to lift the lock­down in Wuhan, the epi­cen­ter of the out­break, and from Italy re­port­ing a re­duc­tion in the num­ber of new cases and coro­n­avirus­re­lated deaths.

De­spite Tuesday’s big gains, it’s no time to get com­pla­cent, said Adam Taback, chief in­vest­ment of­fi­cer for Wells Fargo Pri­vate Bank.

“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. To­day was a good day, but we would not nec­es­sar­ily see this as turn­around time.”

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