Dow drops more than 700 points despite central banks’ coronavirus salvo
US stocks recovered Thursday after an early selloff threatened to continue the market’s brutal downturn amid the coronavirus pandemic.
The Dow Jones industrial average rose as much as 244.20 points, or 1.2 percent, erasing a 721-point loss that came in early trading. The blue-chip index was recently up 102.73 points, or 0.5 percent, at 20,001.65 after closing below 20,000 for the first time in three years on Wednesday.
The Dow still has yet to close below the closely watched mark of 19.827.25 — its closing price on Jan. 20, 2017, the day that Donald Trump was sworn into office as president. But it has dipped below that level several times this week.
The S&P 500 climbed as much as 1.3 percent after shedding 2.2 percent after the opening bell. And the Nasdaq composite rose as much as 3.1 percent after dropping 1 percent in early trading.
The stark reversals came after the European Central Bank announced a massive debt-buying program and the Federal Reserve broadened its already aggressive effort to keep markets afloat during the pandemic.
“The monetary easing has been coming thick and fast recently and while I have no doubt that it’s making a huge difference and will continue to do so for the rest of the year, investors just haven’t been buying it,” OANDA senior currency analyst Craig Erlam wrote in a commentary.
The ECB announced plans Thursday to buy as much as 750 billion euros ($809 billion) in private- and public-sector securities through a new “Pandemic Emergency Purchase Program.” The move came with a promise from bank president Christine Lagarde that there were “no limits” to the steps officials would take to protect the economy from the coronavirus.
Some European markets jumped on the news Thursday morning. Four major indexes there turned negative in the afternoon but all except Germany’s DAX later climbed back into the green.
The Fed also expanded currency swap lines to more countries Thursday morning after announcing a program late Wednesday to offer financial institutions loans backed by assets bought from money market mutual funds.
“Government resources are unlimited when they have the central bank behind them with its money-printing capabilities that knows no limits,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in a Wednesday evening note. “Investors must know the world has changed. The world’s economic leaders will not rest until the financial world is on a firmer footing.”
Thursday’s volatile stock movement came as the coronavirus pandemic continued to rock the US economy. The number of people applying for unemployment benefits jumped 33 percent last week to 281,000, an early sign that the virus is forcing companies to lay off workers. Experts expect the number to grow even further as job losses spread.
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