Stocks

Wall Street jumps after Monday's historic sell-off as Fed boosts liquidity to fight coronavirus effect

Reuters NEW YORK | Updated on March 18, 2020 Published on March 18, 2020

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., March 17, 2020.   -  REUTERS

Indexes up: Dow 5.2%, S&P 500 6%, Nasdaq 6.2%

- The S&P 500 rose 6% on Tuesday, clawing back a significant portion of Monday's steep losses, as the Federal Reserve and the White House took further steps to boost liquidity and stem damage from the coronavirus outbreak that has gripped the global economy.

The U.S. central bank relaunched a financial crisis-era purchase of short-term corporate debt to help companies be able to continue paying workers and buy supplies through the pandemic.

The move to buy back commercial paper followed several emergency measures taken by the Fed on Sunday, including slashing interest rates to near zero.

Also on Tuesday, the Trump administration pursued an $850 billion stimulus package to buttress the economy and mulled sending Americans $1,000 checks within two weeks.

“This issue about liquidity has been a concern, and that's what they're trying to alleviate,” said Stephen Dover, head of equities at Franklin Templeton.

“That said, what is as big a factor is that since this is a consumer-driven slowdown, you have to have fiscal stimulus... and we're seeing around the world very large fiscal stimulus, so that's a lot of what is affecting the market now.”

The pandemic is causing severe business and travel disruptions across the globe as people stay home and avoid their usual activities. Many companies have warned of lower revenue, and most market watchers are bracing for a U.S. recession.

With the day's bounce, the market has retraced only part of its recent losses. The S&P 500, which on Monday fell 12% in its biggest one-day decline since the 1987 Black Monday crash, is still down 25.3% from its Feb. 19 record closing high, and many market-watchers see more volatility ahead.

“We're far from out of the woods. We haven't had back-to-back positive days for two weeks,” said Michael James, managing director of equity trading at Wedbush Securities.

The Dow Jones Industrial Average rose 1,048.86 points, or 5.2%, to 21,237.38, the S&P 500 gained 143.06 points, or 6.00%, to 2,529.19 and the Nasdaq Composite added 430.19 points, or 6.23%, to 7,334.78.

So far though, many of the measures announced by policymakers and the government have not been able to stem the recent sell-off in stocks for long.

Monday's drop was the S&P 500's third-biggest daily percentage drop, beaten only by the 1987 rout and the Great Depression crash in 1929.

Some of the biggest decliners in the S&P 500 in the last month include cruise operators like Norwegian Cruise Line Holdings, hotels such as MGM Resorts, clothing companies like Capri Holdings and department stores, including Macy's.

Another company that has suffered sharp losses is Boeing Co . Its shares tumbled again on Tuesday following a rating downgrade that reflected its worsening cash flow due to the extended grounding of its 737 MAX jet and the blow from the coronavirus pandemic.

Equity investors were playing it somewhat safe on Tuesday, giving the biggest boosts to so-called defensive sectors known for reliable dividends. Among the S&P's 11 major industry sectors, utilities was the biggest percentage gainer, adding 13%, followed by consumer staples, which rose 8.4%.

Growth sectors also got some attention, with technology climbing 6.8% a day after its record daily percentage decline.

Healthcare stocks were another bright spot. Pfizer Inc gained 6.6% after signing a deal with Germany's BioNTech SE to co-develop a potential coronavirus vaccine.

Regeneron Pharmaceuticals Inc jumped 11.5% after the company said it had identified antibodies that could potentially treat COVID-19.

Advancing issues outnumbered declining ones on the NYSE by a 1.44-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and 209 new lows; the Nasdaq Composite recorded seven new highs and 876 new lows.

On U.S. exchanges, 16.9 billion shares changed hands compared with the 13.98 billion average for the last 20 sessions.

Investors cited potential problems in reducing trading hours after U.S. Treasury Secretary Steven Mnuchin said at a news conference that the Trump administration intends to keep markets open but that shortened trading hours may be needed at some point.

Published on March 18, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.