U.S. stocks rebounded Tuesday, helped by the White House backing an $850 billion federal stimulus plan and a Federal Reserve move to backstop the commercial paper market by providing short term funding to businesses hit by the coronavirus pandemic.
The recovery came a day after the Dow Jones Industrial Average suffered its worst one day fall since the 1987 market crash as governments in the U.S. and Europe shut down significant amounts of economic activity in an attempt to slow the pandemic that originated in China in January.
How did stocks perform?
The Dow /zigman2/quotes/210598065/realtime DJIA -0.29% closed 1,048.79 points, 5.2%, higher, at 21,237.31, after briefly dipping below the key 20,000 threshold mid-morning. while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.20% added 143.06 points, 6%, to close at 2,529.19. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.27% closed up 430.19 points or 6.2%, at 7,334.78.
The Dow is off 28% from its Feb 12 record closing high, while the S&P 500 and Nasdaq are off by about 25% and 26%, respectively, from their Feb. 19 peaks.
What drove the market?
Stocks pushed higher midday after a White House briefing that outlined some steps the government was considering to mitigate the effects of the coronavirus epidemic, including allowing the deferral of tax payments, sending stimulus checks to Americans, and keeping financial markets open despite the recent volatility.
Investor anxieties about the coronavirus outbreak had deepened even after the Federal Reserve’s emergency Sunday interest-rate cut, which did little to spark buying on Wall Street. On Monday President Donald Trump warned of a possible recession due to the pandemic and the possibility that the viral outbreak could last deep into the summer.
The mostly downtrodden mood on Wall Street has been attributed to investors’ unfulfilled desire for more relief for individuals and small businesses and even some major cooperations that have been pummeled by the epidemic.
The Republican-led U.S. Senate appeared on track to pass a bipartisan coronavirus bill around the middle of this week, after the Democratic-controlled House voted overwhelmingly for the legislation on Saturday and President Trump threw his support behind it. Senate Leader Mitch McConnell on Tuesday said legislators would immediately begin work on a second bill.
Those reported efforts come as governments and central banks around the world attempt to curtail the negative effects from travel disruptions and business closures seen as strategies to mitigate the spread of the deadly disease.
“Who knows about the next couple of days,” said David Rosenberg, chief economist and strategist of Rosenberg Research. “We’ve come off six days where the market has been up or down at least 4%. Could we bounce back on some short-covering rally? Sure. The one thing that is going to be with us is volatility and interest rates pressing against the floor. The markets basically are broken.”
In an interview with MarketWatch, Rosenberg, a noted “uber-bear,” said he thinks we’re likely two-thirds of the way through the bear market. “The end point is likely no higher than 2,250 on the S&P 500,” he said.
At least 4,281 cases have been confirmed in the U.S. along with more than 70 deaths, according to data from Johns Hopkins University.