Stocks rebounded sharply from a three-year low on Tuesday, surging up to 11% higher amid reports that Congress will imminently reach an agreement on a pending USD2 trillion fiscal stimulus bill to cushion the economic blow from coronavirus.
The Dow Jones Industrial Average rose by a whopping 11.3%, nearly 2,100 points, for its biggest one-day gain since 1933. The S&P 500 was up 9.3%—its best day since October 2008, while the Nasdaq gained 8.1%.
Stocks came roaring back to life as Congress neared a deal on the USD2 trillion coronavirus stimulus bill that has been under discussion in the Senate since last week.
House Speaker Nancy Pelosi told CNBC on Tuesday that there is “real optimism” in Congress about reaching an agreement on the massive USD2 trillion coronavirus relief package, following similar reports from both Senate Minority Leader Chuck Schumer (D-Ny.) and Steven Mnuchin Secretary of Treasury late on Monday night.
President Trump later in the day also indicated that he was hoping to quickly reopen the economy, despite advice to the contrary from top health officials he said that he would love to have it open by Easter.
24th March’s rally followed another day of rough trading on Monday, when the Dow and S&P 500 hit their lowest levels in three years after Congress again failed to pass the giant fiscal stimulus package—worth around USD2 trillion—to stem the economic fallout from the coronavirus pandemic.
Vital Knowledge founder Adam Crisafulli predicts that the current rally should last beyond just a single day. He further added that Markets are deeply oversold and a lot of the most acute pain over the last few days was a function of forced de-leveraging, a process that is nearly (if not totally) complete. He forecasts that 24th March’s rally will probably be enough to propel the S&P 500 back toward the 2,800 level over the coming days and weeks (it currently sits at just under 2,500 points). He reiterates that getting the USD2 trillion fiscal stimulus bills over the finish line in Congress is still the number one priority for investors.
Many airline and cruise stocks, which were some of the hardest hit by business shutdowns resulting from the coronavirus, posted major gains on Tuesday 24th March. That’s because the expected USD2 trillion coronavirus relief package will allocate hundreds of billions of dollars to distressed industries such as theirs. Shares of casino operators like Wynn Resorts and MGM Resorts jumped by 15.4% and 32.8%, respectively.
The U.S. economy and stock market could bounce back faster than expected, according to top JPMorgan strategist Marko Kolanovic. He forecasts that the economy could restart in just a “number of weeks,” with the S&P 500 rebounding 40% and going back to record-high levels by early 2021.