NEW YORK (AP) — Stocks are closing sharply higher on Wall Street Tuesday, adding 4.9% to major indexes, as hopes build for a greater response from the Trump administration to the economic threat from the coronavirus outbreak.
The gains recovered about half of the market’s historic losses from the day before and came after another wild day of whipsaw trading. The Dow Jones Industrial Average jumped more than 1,100 points.
Market watchers say more big swings are likely until the outbreak starts to slow down. The price of oil bounced back a day after cratering nearly 25% after Saudi Arabia started a price war with Russia.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below:
Wall Street endured another day of dizzying trading Tuesday, whipping up and down with hopes that the U.S. and other governments will cushion the economy from the pain of the coronavirus.
The S&P 500 surged as much as 3.7% in the morning and recouped nearly half its historic drop from the prior day, but all of those gains evaporated by midday. The index then bounced up and down before turning decisively higher after President Donald Trump pitched his ideas for a break on payroll taxes and other economic relief to Senate Republicans. It was up 3.2%, as of 3:15 p.m. Eastern time.
The moves reflected the mood of a market that seems just as preoccupied with the virus as the rest of the world. Since U.S. stocks set their record high just a few weeks ago, traders have crossed over from dismissing the economic pain created by COVID-19 — thinking it’s similar to the flu and could stay mostly contained in China — to being in thrall to it — worrying that it may cause a worldwide recession.
Such big swings are likely to continue as long as the number of infections accelerates, market watchers say. In the meantime, investors want to see a big, coordinated response from governments and central banks to shore up the virus-weakened economy.
Monday’s plunge for U.S. stocks was the sharpest since 2008, when global authorities banded together to rescue the economy from the financial crisis.
Investors saw glimmers of such a coordinated response, which led to Tuesday’s early optimism.
At a White House press briefing Monday night, Trump said his administration would be asking Congress to pass payroll tax relief and other quick measures aimed at easing the impact of the coronavirus on workers.
In Japan, a task force set up by the prime minister approved a 430 billion yen ($4.1 billion) package Tuesday with support for small to medium-sized businesses.
But markets on Tuesday were still waiting for details on Trump’s plan.
In a meeting with major health insurers, Vice President Mike Pence said those companies have agreed to waive co-pays on coronavirus testing. Trump, meanwhile, said the government is working with the cruise line industry, one of the hardest hit by the virus.
The comments helped lift the market, which had turned to losses, but neither Pence nor Trump said anything during the brief televised remarks about a potential cut to payroll taxes. The index shuffled along with modest gains until after Trump made his pitch for economic aid on Capitol Hill.
“I would expect the authorities to pull out all the stops to reduce uncertainty,” said Alec Young, managing director of global markets research at FTSE Russell. “This may be their one opportunity to do that.”
Perhaps the most notable move in markets Tuesday was that Treasury yields pushed higher. The bond market rang warning bells about the virus long before the stock market, and a rise in yields is a sign that fear has receded a bit.
The 10-year Treasury yield rose to 0.77% from 0.49% late Monday. A week ago, it had never been below 1%.
The S&P 500 was up 3.2%, as of 3:15 p.m. Eastern time. The Dow Jones Industrial Average rose 780 points, or 3.3%, to 24,631, and the Nasdaq composite was up 3.5%.
The recovery is pulling the stock market a bit further from the edge of a bear market, signified by a drop of 20% from a record. The S&P 500 is down 16% from its high. If it can rally back to that point, it would extend the longest-ever bull market, which began its climb after the market hit bottom on March 9, 2009.
Brent crude, the international standard, rose $2.86, or 8.3%, to settle at $37.22 a barrel, while benchmark U.S. crude rose $3.23, or 10.4%, to $34.36 a barrel. Oil prices plunged 25% on Monday amid a price war between producers, who are pulling more oil out of the ground even though demand is falling due to the virus.
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.
The vast majority of people recover from the new virus. According to the World Health Organization, people with mild illness recover in about two weeks, while those with more severe illness may take three to six weeks to recover. In mainland China, where the virus first exploded, more than 80,000 people have been diagnosed and more than 58,000 have so far recovered.
But because the virus is new, experts can’t say for sure how far it will ultimately spread. That has investors worried about the worst-case scenario for corporate profits and the economy, where factories and supply chains are shut around the world due to quarantines and people stay huddled at home instead of working or spending.
Investors expect central banks around the world, which have done some of the heaviest lifting to prop up markets the last decade, to do more to cushion the blow.
Traders expect the Fed to cut rates again at its meeting next week. They’re also expecting some kind of action from the European Central Bank, which meets on Thursday.
But central banks have limited firepower, and some have already cut rates blow zero. That adds pressure on governments to do what they can as well. Investors are asking for quick, coordinated aid to provide support to companies and households who are going to be out income because of the virus.
For strategists at BlackRock Investment Institute, that could include generous sick-pay programs or even direct payments to households. For businesses, governments could suspend collecting tax revenue to give them some temporary relief and hold on to cash as the world waits for the outbreak to be contained.
“That would prevent these temporary disruptions from turning into a full-blown global recession,” strategists at BlackRock Investment Institute wrote in a report.
Until then, many investors have had a “sell-first, ask questions later” reaction to the uncertainty, said Greg McBride, chief financial analyst at Bankrate.com.
Still, he urges investors to avoid changing their long-term investment strategies, which can play out over years or decades, because of short-term volatility.
“Markets fall quickly, but they can rebound rapidly,” McBride said. “Investing is a marathon, not a sprint.”
AP Business Writer Damian J. Troise contributed to this report.
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