Stocks recovered Friday following a brutal week of selling after President Donald Trump declared a national emergency over the fast-spreading coronavirus, a move that will free up about $50 billion in federal aid to combat the global pandemic.
Trump also announced new efforts to expand testing for the virus. Investors were anticipating an aid package from Washington, a move that investors hope can stem the economic damage from the virus.
Stocks accelerated gains in the final half hour of trading in the midst of Trump’s remarks to post their biggest one-day gain since the financial crisis. Traders and analysts said the latest developments removed some uncertainty that was hanging over financial markets.
“The change in tone shows that the Trump administration is taking this more seriously now,” says Thomas Martin, senior portfolio manager at Atlanta-based GLOBALT Investments. “This still isn’t over by any stretch, but it’s a better sign.”
Stocks stabilized after Wall Street’s worst day since the “Black Monday” crash of 1987. The Dow Jones industrial average jumped 1,985 points to close at 23,185.62, a day after plunging 2,352 points, or 10%, for its worst loss since its nearly 23% drop on Oct. 19, 1987.
The Standard & Poor’s 500 soared 9.3% to end at 2,711.02. The broad index tumbled more than 20% from its February record Thursday, sliding into a bear market and officially ending Wall Street’s historic 11-year bull market run.
Even with Friday’s bounce, the S&P 500 shed 8.8% this week, its worst drop in two weeks when anxiety began to rise over the virus outbreak. The broad index closed either up or down more than 4% each day this week for the first time since November 1929, according to LPL Financial.
In just a matter of weeks, U.S. stocks have retreated from records and wiped out all the gains made during 2019, one of the best for the market in years. All the major indexes are in a bear market, or a drop of at least 20% from all-time highs.
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House Speaker Nancy Pelosi said the House would move forward with a vote Friday. The bill would include free virus testing for all Americans, including the uninsured, as well as two weeks of paid sick leave for those who have to skip work due to the virus. It would also included expanded federal food assistance, such as seniors’ meals, student lunches and food banks.
Treasury Secretary Steve Mnuchin struck a positive tone Friday morning, saying a deal on a virus response package with Congress was imminent.
“We’re very close to getting this done,” he told CNBC.
The New York Federal Reserve said Friday morning it would ramp up its Treasury bond purchases in a bid to help cushion the financial system. The central bank took steps Thursday to inject more than $1.5 trillion into the markets to help calm investors who are fearful of the economic impact of the virus.
The rout has come amid cancellations and shutdowns across the world, including Trump’s suspension of most travel to the U.S. from Europe. Worries have grown that the White House and other authorities around the world can’t or won’t counter the economic damage from the outbreak any time soon, threatening to end the decade-long economic expansion.
The coronavirus has infected around 128,000 people worldwide and killed over 4,700. The death toll in the U.S. climbed to 39, with over 1,300 infections.
“The recent shocks to the global economy are unprecedented,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a note. “While we are still projecting modest growth in the coming months, the impact of the coronavirus threatens the longest expansion in U.S. history.”
In both cases in 2020 and 1987, the economy was at or near full employment and generally healthy going into the crash. After the 1987 crash, there were widespread calls for an imminent recession as there are today, but that didn’t play out. The stock market recovered by almost 30% from its low within the next year and rose to a fresh high within about 18 months.
“Who knows how the contemporary crisis will play out, but it is worth thinking about its similarity to another quick moving and very scary market collapse when a recession did not occur,” Jim Paulsen, chief investment strategist for Leuthold Group, said in a note.
Global markets were mixed on Friday the 13th in most markets. In Europe, France’s CAC 40 jumped 1.8%, while Germany’s DAX rose 0.8%. Tokyo’s Nikkei 225 fell 6%. Sydney’s S&P ASX rose 4.4% and the Shanghai Composite declined 1.2%. In Hong Kong, the Hang Seng lost 1.1%.
Contributing: The Associated Press