Stocks rally after Wall Street's worst day in 12 years
Stocks jumped after Monday's historic plunge produced the worst day of losses since the financial crisis in 2008. Investors are hopeful that a fiscal stimulus package from the federal government will ease the economic impact of the widening coronavirus outbreak.
The Dow rose 1,167 points, or 4.9% to close at 25,018. The broad-based S&P 500-stock index and the tech-heavy Nasdaq composite both gained nearly 5%.
"Stocks posted impressive headline gains, but more strength needs to be seen beneath the surface to have confidence that the downside momentum in stocks has been broken," William Delwiche, investment strategist at Baird, said in a note.
Tuesday's surge erase part of Monday's nearly 8% plunge, which marked the biggest single-day point drop in the history of the Dow and the largest percentage decline since 2008. Economists have raised the likelihood of a recession, warning that American consumers wary of the virus could pare spending on travel, restaurants, sporting events and other businesses.
Investors are banking on government intervention to shore up the economy, with the Trump administration considering a payroll tax cut or targeted aid to affected industries. President Donald Trump joined Vice President Pence, Treasury Secretary Steven Mnuchin and economic adviser Larry Kudlow at the Capitol Tuesday to meet with Republican lawmakers to discuss how to address the economic fallout from the coronavirus.
Through Monday's close of trading, the Dow had shed about 19% of its value since its most recent high — close to the 20% loss that traditionally defines a bear market.
Investors are grappling with uncertainty over the potential impact of the coronavirus. Anti-disease controls that shut down Chinese factories are spreading as the U.S. and European countries close schools, cancel public events and impose travel controls.
"Markets look poised to remain volatile and under pressure as the number of global coronavirus cases rises," UBS analysts told investors in a report. "It now appears increasingly likely that governments and consumers around the world will have to adopt some of the more dramatic virus containment measures that were successful in Asia."
Italy, the hardest-hit country outside of China, announced that travel restrictions that started earlier in its north would be extended nationwide. In other countries trying to contain the coronavirus, Ireland canceled St. Patrick's Day parades and Israel ordered visitors quarantined ahead of Passover and Easter, one of the busiest travel periods of the year.
"We are grappling with the problem of pricing epidemic-related uncertainty," said Arthur Kroeber of Gavekal Research in a research note. "Eventually, rationality will return and equity prices and bond yields will rebound to more justifiable levels. The key question then becomes, just when is 'eventually'? We cannot answer that question."