U.S. Stocks Regain Ground Amid Stimulus Optimism

After experiencing the worst week since the 2008 financial crisis, stock showed a strong move back to the upside during trading on Monday. The major averages moved sharply higher but only partly offset their recent steep losses.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow skyrocketed 1,293.96 points or 5.1 percent to 26,703.32, the Nasdaq soared 384.80 points or 4.5 percent to 8,952.16 and the S&P 500 spiked 136.01 points or 4.6 percent to 3,090.23.

The rebound on Wall Street was partly due to bargain hunting, with traders picking up stocks at reduced levels following the sell-off seen in recent sessions.

The Dow ended last Friday’s trading at a nearly nine-month closing low, while the S&P 500 finished the day at its lowest closing level in four months.

Traders also seem optimistic about central banks around the world taking action to counteract the impact of the coronavirus on the global economy.

Last Friday, Federal Reserve Chairman Jerome Powell said the central bank will “act as appropriate to support the economy” amid the evolving risks posed by the coronavirus outbreak.

CME Group’s Fed Watch tool currently indicates a 100 percent chance that the Fed will cut rates by 50 points at its next meeting later this month.

In U.S. economic news, the Institute for Supply Management released a report showing a slight expansion in manufacturing activity in the month of February.

The ISM said its purchasing managers index edged down to 50.1 in February from 50.9 in January, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to dip to 50.5.

A separate report released by the Commerce Department showed construction spending in the U.S. jumped by much more than expected in the month of January.

The Commerce Department said construction spending surged up by 1.8 percent to an annual rate of $1.369 trillion in January after inching up by 0.2 percent to a revised rate of $1.346 trillion in December.

Interest rate-sensitive utilities stocks moved sharply higher over the course of the session, driving the Dow Jones Utility Average up by 5.5 percent. The average bounced off its lowest closing level in well over three months.

Substantial strength was also visible among software stocks, as reflected by the 5.2 percent spike by the Dow Jones U.S. Software Index.

Healthcare, commercial real estate and retail stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan’s Nikkei 225 Index jumped by 1 percent, while China’s Shanghai Composite Index spiked by 3.2 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index fell by 0.3 percent, the French CAC 40 Index rose by 0.5 percent and the U.K.’s FTSE 100 Index surged up by 1.1 percent.

In the bond market, treasuries extended their recent rally amid expectations the Fed will cut rates later this month. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.9 basis points to 1.088 percent.

Looking Ahead

News regarding the coronavirus outbreak is likely to remain in focus on Tuesday amid a quiet day on the U.S. economic front.

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