The Dow Jones industrial average rebounded Tuesday, posting its biggest one-day gain in nearly 90 years on hopes that Congress would pass a stimulus bill to shield the economy from the coronavirus pandemic.
The blue-chip average surged more than 2,100 points, or 11.4%, to close at 20,704.91, its largest percentage gain since March 1933 after slumping to a three-year low a day earlier. The Standard & Poor’s 500 jumped 9.4% to end at 2,447.33, its biggest gain since October 2008.
Following a turbulent start to the week, stocks stabilized and Treasury yields rose in a sign that investors are feeling less fearful as Congress was nearing a rescue plan that could inject $2 trillion into the economy. The measure is designed to provide direct payments of $1,200 to most Americans, help small businesses shuttered across the country and aid the hard-hit travel industry.
To be sure, the market has seen rebounds like this before, only for them to wash out immediately. Since stocks began selling off on Feb. 20, the S&P 500 has had six days when it’s risen, and all but one of them were big gains of more than 4%. After those rallies, stocks fell an average of 5% the next day.
The last time the S&P 500 recorded back-to-back days of gains was Feb. 11 and Feb. 12.
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Democrats blocked a vote to advance the stimulus package on Monday, criticizing a $500 billion fund that the Republican proposal sets aside for distressed businesses. They want to steer more assistance toward 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.”
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 because of the pandemic. India’s prime minister, meanwhile, ordered a lockdown in the country of 1.3 billion people for 21 days.
Heading into this week, the S&P 500 had sold off more than 30% since stocks hit records in mid-February, the fastest such decline in history, according to Bank of America Global Research. Following Tuesday’s gains, the broad index was off 28% from recent highs.
Globally, more than 18,000 people have been killed by the virus and more than 400,000 infections have been confirmed, according to the Johns Hopkins University data dashboard.
The U.S. death toll reached 674 hours after growing by more than 100 in a 24-hour period. As of Tuesday afternoon, the U.S. had more than 51,000 confirmed cases of the coronavirus, trailing only Italy and China. New York state, now testing more than 16,000 people daily, has more than half the U.S. cases.
The Trump administration is expected to officially trigger the Defense Production Act for the first time on Tuesday to obtain about 60,000 coronavirus test kits to help health care workers confront a widespread shortage of medical supplies amid the unfolding crisis.
Travel-related stocks surged Tuesday to the market’s biggest gains. Norwegian Cruise Lines, MGM Resorts and American Airlines Group were all up at least 30%. All, though, remain 60% or more below where they were last month.
Other areas of the market that were hardest hit in recent weeks were also helping to lead the market higher, including energy companies and banks. U.S. oil futures gained 2.8% to settle at $24.01 a barrel.
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 0.84% from 0.76% Monday. It fell below 1% for the first time ever recently.
In Europe, the FTSE 100 in London rose 9% and Frankfurt’s DAX added 11%. The CAC 40 in Paris added 8.4%. 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