Dow surges 1,049 points on stimulus moves after worst day since 1987
US stocks rebounded on Tuesday — one day after they took their worst hit since the crash of 1987 — as the Federal Reserve and the White House unveiled fresh moves to ease the economic mayhem that’s being wreaked by the coronavirus epidemic.
The Dow Jones industrial average — which had tumbled nearly 3,000 points on Monday after President Trump warned the virus could persist in the US through the summer — gained 1,048.87 points, or 5.2 percent, to close at 21,237.38.
The bounceback came amid reports that the Trump administration would push for an $850 billion stimulus package — including a payroll tax cut and $50 billion in aid to the airline industry — to blunt the coronavirus’s economic impact.
Treasury Secretary Steven Mnuchin also said the White House is working with Congress on a plan that would send checks to every American in an effort to get money in consumers’ pockets quickly.
US officials are “trying to communicate that we’re going to do whatever it takes,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “At this point we’re going to bring everything we got and then some.”
The rally came after a roller-coaster day that earlier saw the Dow fall below 20,000 for the first time in more than three years to an intraday low of 19,882.26 — less than 100 points above where the index closed on the day of President Trump’s Jan. 20, 2017 inauguration.
By the session’s end, the S&P 500 climbed 6 percent to 2,529.19 . The Nasdaq rose 6.2 percent to 7,334.78.
Wall Street has been clamoring for fiscal action from Congress and the White House to accompany the Fed’s aggressive monetary policy moves — the latest of which aims to help credit flow to households and businesses.
The bank on Tuesday said it will set up a “Commercial Paper Funding Facility” to buy debt from eligible companies in a tight credit market, a strategy first used during the 2008 financial crisis. That comes on the heels of the Fed slashing its benchmark interest rate to near zero and the restart of its bond-buying program known as quantitative easing.
“The market wants the government to take the worst-case scenario off the table which is that we run out of money because people can’t work,” said Michael Antonelli, market strategist at Robert W. Baird & Co. “There’s been a real ramp-up in fiscal response. Targeting sectors to putting checks in peoples’ pockets.”
“The Fed has not been getting much credit for what it has been doing but you can see where its focus is,” added Quincy Krosby, chief market strategist at Prudential Financial. “It needs to complement this stimulus package. It can’t do it all on its own.”
Tuesday’s bounce was a rare bright spot in a volatile period that has seen Wall Street take a beating as the coronavirus pandemic shuts down businesses around the US and threatens to arrest consumer spending.
The Dow and S&P indexes fell into bear-market territory — defined as a 20 percent decline from recent highs — last week amid growing panic about the coronavirus. The S&P fell sharply enough to trigger market circuit-breakers and briefly halt trading three times within six trading days.
The S&P fell sharply enough to trigger market circuit-breakers and briefly halt trading three times in six trading days. It closed Monday down nearly 30 percent from the record high set less than a month ago.
“Clearly no one knows how bad things could get and when stocks will ultimately might bottom, but we feel we are getting close,” said Ryan Detrick, senior market strategist for LPL Financial.
But more turbulence is on the way, Paulsen said, as the CBOE Volatility Index — which is often called the market’s fear gauge — hit a record high on Monday.
“We’re looking for a bottom and this is a process,” Paulsen said.
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