(Associated Press) Stocks on Wall Street joined a worldwide rally Tuesday as optimism rose, for one morning at least, that government officials and central banks are unleashing enough aid to ease the economic pain caused by the coronavirus outbreak.
The S&P 500 surged more than 6%, and the Dow jumped nearly 1,400 points in morning trading as a wave of buying interrupted what has been a brutal month of nearly nonstop selling. Depite the rally, investors were far from saying markets have hit bottom. Rallies nearly as big as this have punctuated the last few weeks, and none lasted more than a day.
Tuesday’s optimism was born in part out of signs that Congress and White House officials may reach an agreement soon on nearly $2 trillion in aid for the economy, though some issues remain. Investors have been frustrated waiting for the U.S. government to do what it can to help the economy, which is shutting down by the day. The Federal Reserve is doing nearly all it can, and it launched its latest round of extraordinary aid Monday.
The buying circled the world. South Korean stocks surged 8.6%, Germany’s market jumped 7.3% and Treasury yields rose in a sign that investors are feeling less fearful. Even crude oil, which has more than halved this year, rose.
“I don’t think there’s any more confidence in the fundamental outlook, but the fact that we’re making progress is good news,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “It’s sort of like, keep the patient alive in the emergency room so you can provide some treatment options.”
The market has seen rebounds like this before, only for them to wash out immediately. Since the market began selling off on Feb. 20, the S&P 500 has had six days where it’s risen, and all but one of them were big gains of more than 4%. After every one of them, stocks fell again the next day.
Ultimately, investors say they need to see the number of new infections peak before markets can find a floor. The increasing spread is forcing companies to park airplanes, shut hotels and close restaurants to dine-in customers. Altogether, estimates suggest at least 10% of the U.S. economy is shutting down, according to Rob Sharpe, head of investments and group chief investment officer at T. Rowe Price.
Top congressional and White House officials say they expect to reach a deal Tuesday on a nearly $2 trillion measure aimed at easing the economic damage inflicted by the coronavirus pandemic.
Treasury Secretary Steven Mnuchin and congressional leaders engaged in final negotiations after a tumultuous but productive day on Monday. While the two sides have resolved many issues in the sweeping package, some final sticking points remained. A Senate vote could come later in the day.
Ravaged in recent days, stocks climbed as negotiators signaled a resolution was in sight.
At issue is an unprecedented economic rescue package that would give direct payments to most Americans, expanded unemployment benefits, and a $350 billion program for small businesses to keep making payroll while workers are forced to stay home. A point of contention has been $500 billion for guaranteed loans to larger industries.
The one-time rebates are about $1,200 per person, or $3,000 for a family of four.
Hospitals could get up to $200 billion for the expected influx of sick patients, said Mnuchin.
Opening the Senate on Tuesday, Majority Leader Mitch McConnell combined optimism about the chances for a deal with frustration at the delays — and a sober view of the crisis at hand.
“The urgency and the gravity of this moment cannot be lost on anyone,” he said. “It’s the most serous threat to Americans’ health in over a century and quite likely the greatest risk to America’s jobs and prosperity that we’ve seen since the Great Depression.”
On the negotiations, he said: “It’s taken a lot of noise and a lot of rhetoric to get us here.” Still, “we are very close. We are close to a bill that takes our bold Republican framework, integrates further ideas from both parties, and delivers huge progress.”
Earlier Tuesday, Trump urged swift action. “Congress must approve the deal, without all of the nonsense, today,” he tweeted. “The longer it takes, the harder it will be to start up our economy.”
Democrats pointed to gains for hospitals, additional oversight of the huge industry stabilization fund, and money for cash-strapped states. A companion appropriations package ballooned as well, growing from a $46 billion White House proposal to an unprecedented $300 billion, including a late $25 billion White House request for a flexible disaster response fund.
The sense of optimism extended to House Speaker Nancy Pelosi, D-Calif., who told CNBC: “I think there is real optimism that we could get something done in the next few hours.” Only Monday, Pelosi introduced a massive Democratic measure with liberal priorities, drawing scorn from Republicans.
The long evening of shuttle negotiations came after a long day trying to close the deal. The package is a far-reaching effort to prop up the U.S. economy, help American households and bolster the health care system in the growing crisis. Senate passage would send the legislation to the House.
Tensions had flared Monday as Washington strained to respond to the worsening coronavirus outbreak, with Congress arguing over the huge rescue package and an impatient Trump musing openly about letting the 15-day shutdown expire March 30.
As the U.S. braces for an onslaught of sick Americans, and millions are forced indoors to avert a spike that risks overwhelming hospitals, the most ambitious federal intervention in modern times is testing whether Washington can act swiftly to deal with the pandemic on the home front.
Trump sounded a note of frustration about the unprecedented modern-day effort to halt the virus’ march by essentially shutting down public activities in ways that now threaten the U.S. economy.
Even though Trump’s administration recommended Americans curtail activities starting a week ago, the president said: “We cannot let the cure be worse than the problem itself. At the end of the 15-day period, we will make a decision as to which way we want to go.”
“Let’s go to work,” he said. “This country was not built to be shut down. This is not a county that was built for this.”
Trump said that he may soon allow parts of the nation’s economy, in regions less badly hit by the virus, to begin reopening, contradicting the advice of medical and public health experts across the country, if not the globe, to hunker down even more firmly.
Pelosi assailed Trump’s idea and fluctuating response to the crisis.
“He’s a notion-monger, just tossing out things that have no relationship to a well-coordinated, science-based, government-wide response to this,” Pelosi said on a health care conference call Monday. “Thank God for the governors who are taking the lead in their state. Thank God for some of the people in the administration who speak truth to power.”
With a wary population watching and waiting, Washington labored under the size and scope of a rescue package — larger than the 2008 bank bailout and 2009 recovery act combined.
Trump has balked at using his authority under the recently invoked Defense Protection Act to compel the private sector to manufacture needed medical supplies like masks and ventilators, even as he encourages them to spur production. “We are a country not based on nationalizing our business,” said Trump, who has repeatedly railed against socialism overseas and among Democrats.
From his home, Democratic presidential rival Joe Biden criticized Trump for stopping short of using the full force of emergency federal authority .
“Trump keeps saying he’s a wartime president,” Biden said in an online address. “Well, start acting like one.”
The urgency to act is mounting, as jobless claims skyrocket and financial markets are eager for signs that Washington can soften the blow of the health-care crisis and what experts say is a looming recession.