U.S. stocks advanced Tuesday on hopes that Congress would pass a stimulus bill to shield the economy from the coronavirus pandemic.
The Dow Jones industrial average rallied more than 1,300 points, after slumping to a three-year low a day earlier. The Standard & Poor’s 500 jumped 6%. Stock futures had briefly surged 5%, triggering an automatic shock absorber.
Stocks stabilized overnight following a turbulent start to the week as Congress was nearing a rescue plan that could inject $2 trillion into the economy, according to reports. The measure is designed to provide direct payments of $1,200 to most Americans and $500 to children, help small businesses shuttered across the country and aid the hard-hit travel industry.
Democrats blocked a vote to advance the package Monday, criticizing a $500 billion fund that the Republican proposal sets aside for distressed businesses. They want to steer more assistance for public health and workers. Negotiations were expected to continue Tuesday.
“If Congress doesn’t get a bill passed in the next few days, we’ll likely see another significant drop in the stock market and then they’ll be forced to do it in a more fire drill type scenario,” says Patrick Healey, founder and president of Caliber Financial Partners. “They need to get their act together and get something passed. Time is ticking away right now.”
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Wall Street and some other stock markets have lost nearly one-third of their value over the past month as business shutdowns spread and airlines, retailers and other industries suffer rising losses. In an unprecedented move, the International Olympic Committee and Japanese government agreed to postpone the 2020 Summer Olympics due to the pandemic.
The S&P 500 has sold off more than 30% since stocks hit records in mid-February, its fastest such decline in history, according to Bank of America Global Research.
Globally, more than 16,700 people have been killed by the virus, according to the Johns Hopkins University data dashboard. The U.S. death toll neared 600 after growing by more than 100 in a 24-hour period. As of early Tuesday, the U.S. had almost 46,500 confirmed cases of coronavirus, trailing only Italy and China. New York state, now testing more than 16,000 people daily, has more than 23,000 cases.
Stocks dropped Monday, with the Dow closing below 19,000 for the first time since November 2016 even as the Federal Reserve prepared to launch an expansion of lending programs in an effort to shield the economy from the virus.
Economists increasingly say a recession seems inevitable. Analysts are slashing their forecasts for upcoming corporate profits. Forecasters say they cannot project how deep the downturn might be or how long it will last.
Professional traders say investors need to see a decline in numbers of new infections before markets can find a bottom.
“Investors are looking for signs on when the government is going to allow businesses to go back to normal,” says Jeff Chang, managing director at Cboe Vest, a financial advisory platform. “It really boils down to more testing so that we can continue to monitor active cases of the virus. Once that’s under control and less people are spreading it, business will likely be able to reopen.”
U.S. government bond prices slipped Tuesday. The yield on the 10-year Treasury rose to 0.82% from 0.76% Monday. It fell below 1% for the first time ever recently.
In energy markets, benchmark U.S. crude rose $1.46 to $24.82 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, added $1.47 to $30.76 per barrel in London.
In Europe, the FTSE 100 in London rose 3.6% and Frankfurt’s DAX added 6%. The CAC 40 in Paris added 4.4%. In Asia, Tokyo’s Nikkei 225 rose 7.1%. The Shanghai Composite Index was 2.3% higher and Hong Kong’s Hang Seng gained 4.5%.
Contributing: The Associated Press