Carmen Reinicke Mar. 24, 2020, 04:09 PM
·
US stocks soared on Tuesday amid multiple reports that a
coronavirus economic aid package is coming soon.
·
The Dow Jones industrial average surged 11.4%, or 2,113 points.
That marked its biggest point gain ever, as well as its largest percentage
increase since 1933.
·
Equities rebounded from declines on Monday that came even after
the Federal Reserve took unprecedented action to prop up the US economy amid
the fallout from the coronavirus outbreak.
US
stocks rose on Tuesday, rebounding from a more than three-year low on Monday,
as investors anxiously awaited a sweeping coronavirus economic relief package
that's in its final stages of approval.
Early
gains extended mid-morning on Tuesday when House Speaker Nancy Pelosi said on a
call with CNBC that there was "real optimism"
that a deal could be reached in the next few hours.
Later,
Senate Majority Leader Chuck Schumer said that talks were on the
2-yard-line. Major indexes surged to session highs in the final 30
minutes of trading.
Here's
where the major US indexes stood at the market close on Tuesday:
·
S&P 500: 2,447.33, up 9.4%
·
Dow Jones industrial average: 20,704.91, up 11.4% (2,113
points)
·
Nasdaq Composite: 7,417.86, up 8.1%
"It's
pretty likely that we do see some kind of deal coming this week" as policy
makers understand how urgent it is, Seema Shah, chief strategist at Principal
Global Investors, told Business Insider in an interview. Until there is a clear
announcement from the government, markets are likely to struggle to hold onto
any gains, Shah said.
The Washington Post reported early
Tuesday that majority leaders were nearing a deal on a $2
trillion coronavirus rescue package after multiple failed attempts to get one
through Congress. Treasury Secretary Steven Mnuchin and Senate Minority Leader
Chuck Schumer were optimistic that a deal could be reached soon, the report
said.
On
Monday, stocks slumped when leaders were unable to agree on a deal to curb the
economic fallout from the coronavirus pandemic. Pressure has mounted as many
states impose lockdowns to curb the spread of COVID-19, the illness caused by
the virus.
Tuesday's
rally came after unprecedented actions announced on
Monday by the Federal Reserve to aid the economy amid the
outbreak, including unlimited bond-buying and help for local governments and
companies. But the outbreak has already had an impact- US economic activity in March fell
the most since 2009, data released Tuesday show.
Going
forward, the details of the stimulus package and the targeted help it offers
will be extremely important, according to Shah. If the plan focuses on keeping
workers employed, "it's going to change the outlook pretty significantly
and markets are going to like that," Shah said.
There's
also likely to be volatility in markets until the number of cases of COVID-19
peaks in the US, Jeff Kleintop, chief global investment strategist at Charles
Schwab, told Business Insider.
The
stimulus package - designed to keep mass layoffs and bankruptcies from
happening while the US grapples with the outbreak- is "really just a
bridge" until then, he said. It isn't going to bring the economy around,
"it just keeps a bad problem from getting worse in the near term,"
said Kleintop.
Oil
might be a better indicator of the economic backdrop as opposed to investor
sentiment, according to Kleintop. The commodity gained early in the day but
pared losses as a glut of supply and weakening demand due to the coronavirus
pandemic outweighed efforts by the US government to boost the economy.
The US
dollar weakened against other currencies in developed and emerging Tuesday, a
good sign that the Fed is getting ahead of the dollar shortage, according to
Kleintop. Gold, the safe-haven asset, also surged Tuesday after a recent
drop.
"Bottom
line, this market has been utterly dangerous since February," Thomas Lee
of Fundstrat wrote in a Tuesday note. "But there are glimmers of
hope."
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