The Dow surged more 2,100 points — its biggest single-day gain since 1933 — on signs that Congress was close to a deal for a US stimulus package worth as much as $2 trillion to offset the economic fallout from the coronavirus pandemic.
The Dow Jones industrial average rose 2,112.98 points, or 11.4 percent, to 20,704.91 as lawmakers closed in on a deal for the rescue package, which would shell out cash payments to American citizens and authorize massive bailouts for troubled industrial sectors, from airlines to mom-and-pop restaurants.
The S&P 500 jumped 9.4 percent to 2,447.33 in its best day since the 2008 financial crisis, while the Nasdaq closed 8.1 percent higher at 7,417.86. The big bounce came after a Monday selloff spurred by the Senate’s failure to pass a stimulus bill for the second time in two days.
While encouraging signals have emerged from Washington and other virus-stricken countries, experts said it’s uncertain whether the volatile market can maintain a rally amid an ever-evolving pandemic. The Dow has not posted two straight days of gains since early February.
“We’re always looking for that higher high to be indicative of investors that have more confidence,” said Quincy Krosby, chief market strategist for Prudential Financial. “The market is going to want to test the bottom, and not just once — maybe twice, maybe even three times. And we have to be prepared for that as well.”
Wall Street has been anxious for a large-scale spending package to complement the Federal Reserve’s monetary-policy efforts to tackle the pandemic that threatens to plunge the US into a deep recession.
The Fed’s Monday move to buy an essentially unlimited amount of Treasury and mortgage-backed securities likely helped stave off a deeper selloff on Wall Street as bitter political gridlock held up the fiscal package.
“Because the fiscal policy response was delayed, that required the Fed to speed up their timetable and put in the ‘whatever it takes’ mantra,” said Andrew Smith, chief investment officer at Delos Capital Advisors.
But the negotiations in Washington have showed investors that Congress is prepared to match the scale of the Fed’s aggressive response to the crisis, according to Jon Adams, senior investment strategist at BMO Global Asset Management. The stimulus proposal’s price tag has ballooned from $850 billion to $2 trillion over the course of about a week.
“The positive is just [that] the size of the package has continued to increase,” Adams said. “It really signals that Congress is willing to do whatever it takes.”
Krosby said investors are also seeing a “green shoot” of a rebound in China now that lockdown measures have been loosened in the city of Wuhan, where coronavirus outbreak started. The number of new cases reported in Italy has also begun to fall.
“It doesn’t meant there won’t be changes, it doesn’t mean there won’t be new waves, but for now it provides empirical evidence that we can have an easing in conditions along the lines of Italy and China,” Krosby said.
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