Stocks surge as central banks vow to respond
Dow Jones rises 5%; gains claw back some ground lost last week
Stocks surged in the final minutes of trading Monday, snapping back from one of the worst weeks for global markets since the 2008 financial crisis as investors seized on promises that the world’s governments would step in to help if the global economy was slammed by the outbreak of the coronavirus.
The Dow Jones Industrial Average soared nearly 1,300 points, or 5%, Monday. The S&P 500 jumped 4.6%, the biggest single-day leap since late December 2018. The rally followed news that central bankers from the world’s big-
gest economies would join a conference call with Group of 7 finance ministers today to discuss a response to the outbreak, fueling expectations among investors that governments might lower interest rates in tandem.
The Nasdaq added 384.80 points, or 4.5%, to 8,952.16. The Russell 2000 index of smaller company stocks picked up 42.06 points, or 2.9%, to 1,518.49. Even with Monday’s big rally, the major U.S. indexes remain in the red for the year.
The huge gains clawed back some of the ground lost last week in a massive sell-off that gave stocks their worst stretch since the financial crisis of 2008.
Apple got a lift Monday after a Wall Street analyst said the iPhone maker is in a better position than many other tech companies to deal with “uncertain times” affecting its supply chain.
Apple shares rose more than 9%, to close at $298.81, after Oppenheimer analyst Andrew Uerkwitz raised his rating on the company’s stock to outperform, and lifted his price target on the shares to $320. Uerkwitz said that he believes “Apple products and services will prove more resilient than competitive products in uncertain times.”
Apple shares had fallen 12.7% last week amid fears that the spread of coronavirus could have a long-term negative impact on the company’s business, and the overall global economy.
“It has already stoked expectations of a coordinated cut,” Roberto Perli, a former Fed researcher who is now an economist at Cornerstone Macro, said in an email. “If it doesn’t happen, it will only add to market volatility.”
But Perli did not see it as a sign that a simultaneous cut with other global central banks was necessarily coming. Nor did Seth Carpenter, another former Fed researcher, now at UBS. “The rally in equities today has perversely probably made it easier for the Fed to sit back and wait to see what happens,” he said in an email.
Early Monday, both the Bank of Japan and Bank of England pledged to monitor markets closely and safeguard financial stability. Later, the International Monetary Fund and the World Bank issued a joint statement saying that the groups stood ready to help “address the human tragedy and economic challenge” posed by the virus, and the European Central Bank said it “stands ready” to respond to signs of a slowdown.
“Throughout the world you are seeing clearly a policy response,” said Rich Ross, a managing director at Evercore ISI. “That’s what’s helping to buoy the market.”
As health officials have raced to contain the outbreak, factories have been shut and businesses squeezed across the globe. Companies are also readjusting annual profit expectations, and economists are lowering forecasts for global growth.
Shares in Europe also recovered from losses, and most indexes in Asia ended higher. Still, bond yields fell to fresh record lows Monday, suggesting that despite the stock rally, investors were looking for safe havens. Yields on the 10-year U.S. Treasury note fell to 1.09%.
Trump: Fed should bail out the economy
President Donald Trump continued his browbeating of the Federal Reserve on Monday, saying Fed Chair Jerome H. Powell and his colleagues should quickly slash interest rates as the economic risk posed by the coronavirus becomes more stark.
“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote on Twitter. “Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate.”
The Fed has begun signaling that a rate cut is likely, and most market participants fully expect a cut at its next policy meeting March 1718, if not before.
On Friday, Powell took the rare step of issuing a statement saying that the Fed was prepared to act “as appropriate to support the economy.”
But the Fed can only cut so much, given interest rates are already low, at a range between 1.5% and 1.75%. Most market participants expect a 50-basis-point cut in March, with some predicting an overall cut this year of 100 basis points — or 1%.
The European Central Bank, which runs monetary policy for Germany and other euro-area countries, has joined most of its global counterparts in simply signaling vigilance in response to the virus. It was already buying bonds as part of an easing program.
U.S. mulls exporting medical products
The Trump administration is grappling with whether to encourage the export of critical medical products like face masks and surgical gear to China — or save those supplies for the United States.
In a notice issued to American businesses last week, the Commerce Department advertised a change in Chinese regulations that would temporarily make it easier for American businesses to export medical products that are useful in battling the coronavirus to China, including protective gear, hand sanitizers and mask manufacturing machines.
The notice came under fire from Rep. Lloyd Doggett, DTexas, who said that it “seemingly conflicts” with congressional testimony by Alex Azar, the health secretary, who said that there was a shortage of face masks for medical professionals to use in the event of a coronavirus epidemic in the United States.
Wholesale gasoline rose 57 cents to $1.54 per gallon. Heating oil climbed 5 cents to $1.53 per gallon. Natural gas rose 7 cents to $1.76 per 1,000 cubic feet.
Gold rose $28.20 to $1,592.30 per ounce, silver rose 29 cents to $16.68 per ounce and copper rose 5 cents to $2.60 per pound.
The dollar fell to 107.87 Japanese yen from 108.42 yen on Friday. The euro strengthened to $1.1163 from $1.1028.