The Best Day Since the Great Depression

By Alex Eule |  Tuesday, March 24

A New Chapter. The coronavirus section of the history books  is already long, and and it's nowhere near finished. Today's entry will look particularly remarkable: 

On Tuesday, March 24, the Dow Jones Industrial Average soared more than 2,100 points. The 11.4% move was the largest one-day gain since 1933, when the United States was still in the depths of the Great Depression, with some 30% of the workforce unemployed.

The March 15, 1933 rally was an early step in the market's long recovery from the 1929 crash. Whether today marks a similarly important moment in the coronavirus recovery remains to be seen, but the day stood out for its wire-to-wire session: Stocks jumped at the open, and they gained ground from there.

It was a reversal of the last month, with energy the best-performing sector, up 16% on the day, and consumer staples the worst, up only 5.1%.

The rally was sparked by news that U.S. lawmakers were close to an agreement for a $2 trillion fiscal stimulus bill intended to bridge the massive economic damage while the nation is all but shut down because of Covid-19. On Tuesday afternoon, Senate Minority Leader Chuck Schumer said, "I don’t see any issues that can’t be overcome in the next few hours." There was no agreement as of 9 p.m. tonight, but senators are unlikely to let markets open tomorrow morning without another update on their progress. 

In the meantime, Nicholas Jasinski has more details on what he says "will likely become the largest single piece of legislation passed in U.S. history."

One of the most notable parts of the bill could be revised treatment for retirement accounts. Draft versions of the rescue bill have eliminated the 10% penalty for early 401(k) withdrawals, and added a waiver for required minimum withdrawals, or RMDs. The 401(k) change is surely to be controversial. On the one hand, retirement funds are a good way for many Americans to supplement missing income in the months to come. The virus shutdown will not last forever -- 18 months remains the worst-case scenario as we wait for a vaccine -- so loaning yourself money seems like a small price to pay. That said, financial advisors have long warned against raiding 401(k)s before retirement. Any type of 401(k) loan would also encourage Americans to withdraw funds with stocks still down 30% over the last month. It's not an ideal time to sell. But "desperate times call for drastic measures," Reshma Kapadia wrote on Barrons.com today. 

Today's rally, of course, means stocks aren't looking nearly as bad as they were yesterday. An 11% gain is generally a great year for stocks -- in fact, the Dow hasn't done that well in 12 of the last 20 calendar years.

The rally will be tested tomorrow -- the last time stocks finished with consecutive days of gains was Feb. 12.