Stocks posted one of their best days ever on Tuesday, a sign of investor belief that Congress has no alternative but to pass a $2 trillion economic rescue package.
The massive stimulus is designed to be a lifeline to Americans and their employers until the novel coronavirus is brought under control and the country finds some semblance of normalcy. The Federal Reserve signaled the gravity of the situation Monday when it said it would spend whatever it takes to preserve the U.S. financial system.
Markets starved for good news shot up Tuesday on faith that the stimulus was almost a given. The Dow Jones industrial average surged 2,112.98 points, or 11.4 %, and pulled itself back above the 20,000 mark. The blue-chip index finished the day at 20,704.91, its best day since 1933 and fourth-best ever. The Standard & Poor's 500 Index jumped 9.4%, to 2,447.33, for its best day since 2008. The tech-heavy Nasdaq composite jumped 8.1%, to 7,417.86.
"It's too early to be blindly optimistic, but the size and pace of the policy responses to this crisis are very encouraging," said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. "This is not a time to be heroes calling a market bottom, but we are keeping a close eye on indications of light at the end of the tunnel."
All 11 S&P sectors were positive, led by a beaten-down energy sector that had lost half its value this year because of a collapse in crude oil prices. Energy posted a nearly 16% gain, led by oil giants such as Chevron. Several oil companies, including BP, saw shares spike amid industry-wide belt-tightening triggered by rock-bottom prices.
Boeing, Home Depot, American Express, JPMorgan Chase and Walt Disney - most of which have been savaged by the public health restrictions - had big days on the Dow as optimism over the stimulus took hold. American led the airlines sector with a 35% jump. The industry is anticipating a massive aid package from the stimulus.
Some of the buying came on the heels of slim-but-positive news that parts of the world were making strides against the pandemic, which has infected nearly 410,000 people worldwide and killed more than 18,200.
"The decline in the growth of virus cases in Italy is very encouraging because it gives the U.S. a line of sight into what the other side of this crisis might look like," Goodwin said.
The eventual exit from the various lockdowns domestically and abroad remains a question. Most health experts say that it will take several weeks or even months of people staying home to significantly contain the spread of the disease.
Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said in an NBC interview last week, "I cannot see that all of a sudden, next week or two weeks from now, it is going to be over. I don't think there is a chance of that."
Analysts, economists and corporate leaders are saying that even the beginnings of a plan would help. President Donald Trump said Tuesday that he would like to see the economy reopened by Easter.
"Beijing announced that its lockdown on Hubei province will be lifted on April 8," said David Rosenberg of Rosenberg Research. "The case count there has plunged significantly. Korea is in such good shape it is now exporting masks. There seems to be a light at the end of the dark tunnel in Italy too. And here at home, President Trump is talking openly about establishing a balance between health and wealth."
Wall Street's turnaround followed a volatile session Monday. Markets tanked after the Senate twice failed to advance the coronavirus stimulus bill. Now, striking positive and optimistic tones, legislators are hashing out remaining differences so that a vote may come to pass by Tuesday night.
Though some details are in flux, the legislation would provide direct payments of $1,200 to many American adults and $500 for children. It would also create roughly $850 billion of loan and assistance programs for businesses, states and cities and increase spending for the unemployment insurance program, as well as hospitals and health-care providers.
The purpose of the Fed action Monday was to keep money flowing to companies, households and cities by buying unlimited amounts of U.S. Treasurys and mortgage-backed securities. The response goes far beyond any the central bank took during the 2008 financial crisis.
"We've already seen the Federal Reserve throw the kitchen sink at this crisis, and now investors are looking to Congress and weighing the impact of this imminent rescue package," said Nicole Tanenbaum, chief investment strategist at Chequers Financial Management. "Once a stimulus deal is reached, while it won't be the silver bullet to curb the virus outbreak, it will provide some much needed clarity and what an ultimate path to economic recovery may look like."
Global markets held their highs even as entire countries announced lockdowns and deaths tolls continued to grow. The markets' rise was partly buoyed by stimulus hopes in the United States. Britain's FTSE 100 jumped nearly 9.1%, and Germany's DAX nearly 11%. The benchmark Stoxx 600 climbed 8.4%. Japan's Nikkei 225 surged 7.1%, and Hong Kong's Hang Seng 4.46%.
Indian Prime Minister Narendra Modi said a 21-day shutdown would begin at midnight local time, extending restrictions to a nation of 1.4 billion people. Late Monday, British Prime Minister Boris Johnson ordered that all citizens stay home and that all nonessential businesses close. Johnson said police would be called in to enforce social distancing if need be. The International Olympic Committee and Japanese officials officially postponed the Tokyo Games until next year; it's the biggest event to date to be canceled or postponed because of the outbreak.
This article was written by Thomas Heath and Rachel Siegel, reporters for The Washington Post.
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