The Dow Jones industrial average gained 2,112.98 points on Tuesday to close at 20,704.91. That was 11.4 per cent in a single session, and the best day for the index since 1933.
The trigger was Washington. Democrats and Republicans said they were close to agreeing a rescue package of nearly $2 trillion, with payments to U.S. households and help for small businesses and the travel industry among its pieces. Investors had spent days watching the Senate stall over it, and the buying let some of that frustration out.
The S&P 500, the index that matters more to most 401(k) accounts, climbed 209.93 points to 2,447.33, up 9.4 per cent and its third-biggest gain since World War II. The Nasdaq composite rose 557.18 points, or 8.1 per cent, to 7,417.86. The buying spread across the globe: South Korean stocks rose 8.6 per cent and Germany’s market 11 per cent. U.S. Treasury yields ticked up, a sign investors felt less fearful.
The hardest-hit sectors led the way. Norwegian Cruise Line, MGM Resorts and American Airlines Group each gained at least 33 per cent. Energy companies and banks were strong as well, though all sat well below their levels of a month earlier.
Few were calling a bottom
Investors were cautious. Rallies nearly as large had broken up the previous few weeks, and none had lasted beyond a day. Since the sell-off began on Feb. 20, the S&P 500 had risen on six days, and all but one of those were jumps of more than 4 per cent. Stocks then fell an average of 5 per cent the following day.
“Today was a good day, but we would not necessarily see this as turnaround time,” said Adam Taback, chief investment officer at Wells Fargo Private Bank. He added: “We still have not seen numbers that give us an indication of just how bad things are.”
Katie Nixon, chief investment officer at Northern Trust Wealth Management, put it more bluntly: “It’s sort of like, keep the patient alive in the emergency room so you can provide some treatment options.” The Federal Reserve had done nearly all it could to prop up markets, including a round of extraordinary aid launched Monday, so investors were pushing Congress to act.
Eric Freedman, chief investment officer at U.S. Bank Wealth Management, warned against assuming the fiscal response would be enough. Rob Sharpe of T. Rowe Price said estimates suggested at least 10 per cent of the U.S. economy was shutting down, as companies parked airplanes, closed hotels and stopped dine-in service at restaurants. Investors, he and others said, would want to see new infections peak before stocks could find a floor.
President Trump said during a Fox News virtual town hall that he hoped to “open up” the economy by Easter. Analysts said that had little to do with the rally and credited stimulus hopes instead.
The data were still ugly
The gains arrived as the first reports showed the damage. A preliminary reading on U.S. business activity in March showed the steepest contraction on record, going back to 2009, and European reports were gloomy too. “Everyone was prepared for a set of shockers, and that is precisely what we got, but they are not a surprise,” said Chris Beauchamp, chief market analyst at IG.
Economists expected a worse number Thursday, when jobless claims were due. Some thought they could far exceed 1 million, against the record of 695,000 set in 1982.
There was some better news from abroad. China was preparing to lift the lockdown in Wuhan, where the outbreak began, and Italy reported fewer new cases and deaths. Craig Erlam, senior market analyst at Oanda Europe, said stocks could start to look more attractive, but “anyone jumping back in now will need to have nerves of steel.”
