Dow surges more than 2,100 points — biggest gain since 1933

The Dow had its best day since 1933, clawing back some of its brutal losses on signs that Congress was nearing a deal for a US stimulus package worth as much as $2 trillion to battle the coronavirus pandemic.

The Dow Jones industrial average surged 2,112.98 points, or 11.4 percent, to 20,704.91 as lawmakers closed in on a deal for the rescue package, which would shell out cash payments to American citizens and authorize massive bailouts for troubled industrial sectors, from airlines to mom-and-pop restaurants.

It was the biggest percentage gain for the Dow in more than 85 years, and its biggest point gain ever.

Stocks also got goosed on Tuesday after President Trump said on Tuesday that he wants the US to be “opened up and raring to go” by Easter, revealing ambitions to restart parts of business life when a 15-day shutdown ends next week, even as health officials warned that the highly contagious virus is threatening to overwhelm hospitals.

The S&P 500 jumped 9.4 percent to 2,447.33 in its best day since the 2008 financial crisis, while the Nasdaq closed 8.1 percent higher at 7,417.86. The big bounce came after a Monday selloff spurred by the Senate’s failure to pass a stimulus bill for the second time in two days.

Stocks had sold off on Monday despite the Federal Reserve issuing what amounted to a “blank check” for the US economy  — extending loans to businesses big and small, and repurchasing hundreds of billions of dollars in government debt — to head off a national liquidity crunch.

While encouraging signals have emerged from Washington and other virus-stricken countries, experts said it’s uncertain whether the volatile market can maintain a rally amid an ever-evolving pandemic. The Dow has not posted two straight days of gains since early February. All three indexes are still off at least 24 percent from the record highs they saw last month.

“With all of this stimulus, we just need a catalyst to spark the fire,” said King Lip, chief investment strategist at Baker Avenue Asset Management, adding that his firm is still waiting to buy back into the market. “That spark will be a peaking of the cases, and when it starts to come down, I think that’s when everything gets lit up.”

In the meantime, Wall Street has been anxious for a large-scale spending package to complement the Federal Reserve’s monetary-policy efforts to tackle the pandemic that threatens to plunge the US into a deep recession.

The Fed’s Monday move to buy an essentially unlimited amount of Treasury and mortgage-backed securities likely helped stave off a deeper selloff on Wall Street as bitter political gridlock held up the fiscal package.

“Because the fiscal policy response was delayed, that required the Fed to speed up their timetable and put in the ‘whatever it takes’ mantra,” said Andrew Smith, chief investment officer at Delos Capital Advisors.

But the negotiations in Washington have showed investors that Congress is prepared to match the scale of the Fed’s aggressive response to the crisis, according to Jon Adams, senior investment strategist at BMO Global Asset Management. The stimulus proposal’s price tag has ballooned from $850 billion to $2 trillion over the course of about a week.

Companies poised to get big handouts were among the biggest gainers on Tuesday. Shares of American Airlines soared 36 percent. Restaurants, among the worst hit of any sectors by the coronavirus, also got a lift on Tuesday, with McDonald’s and Chipotle surging 18 percent and 13 percent, respectively.

“The positive is just [that] the size of the package has continued to increase,” Adams said. “It really signals that Congress is willing to do whatever it takes.”

Quincy Krosby, chief market strategist for Prudential Financial, said investors are also seeing a “green shoot” of a rebound in China now that lockdown measures have been loosened in the city of Wuhan, where coronavirus outbreak started. The number of new cases reported in Italy has also begun to fall.

“It doesn’t meant there won’t be changes, it doesn’t mean there won’t be new waves, but for now it provides empirical evidence that we can have an easing in conditions along the lines of Italy and China,” Krosby said.

With Reuters

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