Dow has best day since 1933 as Congress nears deal on aid

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This photo provided by the New York Stock Exchange shows the unoccupied NYSE trading floor, closed temporarily for the first time in 228 years as a result of coronavirus concerns, Tuesday March 24, 2020. (Kearney Ferguson/NYSE via AP)

NEW YORK (AP) — The Dow Jones Industrial Average surged to its best day since 1933 as Congress and the White House neared a deal on Tuesday to inject nearly $2 trillion of aid into an economy ravaged by the coronavirus.

The Dow rose 2,112.98 points, its biggest point gain in history, to 20,704.91, an 11.4% burst. The more closely followed S&P 500 index, much more important to most 401(k) accounts, rose 209.93—or 9.4%—to 2,447.33 for its third-biggest percentage gain since World War II. The Nasdaq composite jumped 557.18 points, or 8.1%, to 7,417.86.

A wave of buying circled the world, interrupting what has been a brutal month of near nonstop selling. South Korean stocks surged 8.6%, Germany’s market grew 11% and Treasury yields rose in a sign that investors feel less fearful.

Despite gains, investors were far from saying markets hit bottom. Rallies nearly as big have punctuated the last few weeks, and none lasted beyond a day.

The market has seen rebounds like this before, only to wash out again immediately. Since stocks began selling off on February 20, the S&P 500 has had six days of rising, with all but one representing big gains of over 4%. Afterward, stocks fell an average of 5% the next day.

Both Democrats and Republicans say they’re close to agreeing on a massive economic rescue package, which will include payments to households, aid for small businesses, and a travel industry bailout, among other things. A vote in the Senate could come later Tuesday or Wednesday.

Investors have waited in frustration for such aid, particularly as the Federal Reserve has done nearly all it can to sustain markets, including the latest round of extraordinary aid on Monday.

One of the things to be careful about is thinking this will be the panacea or that this fiscal response will be sufficient.

Eric Freedman, Chief Investment Officer at U.S. Bank Wealth Management

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.

Economists are topping each other’s dire forecasts for how much the economy will shrink this spring due to closed businesses, and a growing number say a recession seems inevitable.

“I don’t think there’s any more confidence in the fundamental outlook, but the fact that we’re making progress is good news. It’s sort of like, keep the patient alive in the emergency room so you can provide some treatment options.”

Katie Nixon, chief investment officer at Northern Trust Wealth Management

Governments and central banks in other countries around the world are unveiling unprecedented levels of support for their economies in an attempt to limit the scale of the upcoming virus-related slump. Germany, a bastion of budgetary discipline, also approved a big fiscal boost.

The gains came even as early reports showed how badly the outbreak hit the global economy. A preliminary reading on American business activity in March showed the steepest contraction since 2009. Reports were also gloomy for Europe.

“Everyone was prepared for a set of shockers, and that is precisely what we got, but they are not a surprise,” says Chris Beauchamp, chief market analyst at IG. “It is at times like this that the market’s propensity to look forward is demonstrated most effectively.”

Norwegian Cruise Lines, MGM Resorts, and American Airlines Group were all up at least 33%. Energy companies and banks were also strong, though all remain well below where they were a month ago.

More dour data is nearly assuredly on the way. On Thursday, economists anticipate a report to show that jobless Americans are applying for unemployment in record numbers. Amid a wave of layoffs, some say the number could far exceed a million, topping the prior record of 695,000 set in 1982.

Helping to lift sentiment in markets is news from China—that it is preparing to lift the lockdown in Wuhan, the origin of the outbreak—and Italy—reporting decreases in new cases and coronavirus-related deaths.

“It’s still early days, of course—perhaps investors can start to envisage life beyond the coronavirus,” says Craig Erlam, senior market analyst at OANDA Europe. “That could make stocks look a little more attractive, although anyone jumping back in now will need to have nerves of steel.”

For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough. Those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems. Recovery could take six weeks in such cases.

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