What Bear Market?

By Alex Eule |  Thursday, March 26

Too Soon? Jobless claims hit a record 3.3 million on Thursday, and U.S. coronavirus cases topped 69,000. Stocks reacted by capping a furious three-day rally larger than anything since 1931. 

We always knew the market would begin to recover before coronavirus was cured, but if you're scratching your head about this week's wild reaction, you're not the only one. Just three days ago, investors were dealing with a devastating bear market that had shaved 37% off the Dow Jones Industrial Average. Some 72 hours later, stocks have soared 21%, marking the start of a new bull market. The Dow Jones Industrial Average jumped 1,352 points, or 6.4%, today alone.

Investor anxiety has been soothed, temporarily at least, by the $2 trillion rescue package passed by the Senate late last night; the vote was 96-0,  suggesting there are still ways for U.S. politicians to come together on a common cause. The package includes $300 billion in direct payments to households, plus more in additional unemployment benefits. (Barron's Lisa Beilfuss has a breakdown on who gets what.)

The Federal Reserve is also promising to pull out every stop. "We're not going to run out of ammunition," Federal Reserve Chairman Jerome Powell told NBC's Today.

In a calm and confident voice, Powell said, the Fed was prepared and able to bridge the economy through the pandemic. Asked about a recession, the Fed chairman said, "We may well be in a recession," and then he reframed the discussion: 

There's nothing fundamentally wrong with our economy, quite the contrary. The economy performed very well right through February ... So we start in a very strong position ... This is a situation where people are being asked to step back from economy activity ... So, in principle, if we get the virus spread under control fairly quickly, then economic activity can resume. And we want to make that rebound as vigorous as possible.

That's the future that investors have already begun to look forward to.

But the present realities remain grim. The three million-plus jobless claims over the last week was up more than 1,000% from last week's 282,000, Lisa reports. The number was far worse, even, than Wall Street was expecting. Economists had forecast 1.64 million claims. The previous one-week high in jobless claims came back in October 1982, when it was 695,000. This is uncharted territory, in every way.