US stocks rose on Tuesday, a day after the Dow Jones Industrial Average plunged nearly 3,000 points for its largest point drop in history, as the government announced plans to stabilize the economy against the worsening coronavirus outbreak.
The blue-chip index gained 1,048.86 points, or 5.2 per cent, while the S&P 500 stock index was up 6 per cent and the Nasdaq jumped 6.2 per cent, recovering from the Dow’s worst percentage drop since “Black Monday” in 1987.
The markets fluctuated drastically, opening up nearly 2 per cent for all the indices, only to quickly lose momentum 10 minutes into the session.
They have since flip-flopped between positive and negative territory in the morning session and staged a steady upward momentum as US President Donald Trump and the White House Task Force began the briefing on the government’s latest efforts to contain the virus and stabilize the economy.
The Trump administration said on Tuesday that it was proposing a massive stimulus package to prop up the economy that could include cash payments to Americans.
US Treasury Secretary Steven Mnuchin, who was pitching the package to Congress in the afternoon, said the administration would allow a 90-day, penalty-free deferral of tax payments of up to US$1 million for individuals and US$10 million for companies.
The package would be mostly focused on adding liquidity to the economy through a payroll tax cut or other mechanism. Some US$50 billion would be directed to helping the airline industry.
On Monday, the stock markets suffered a dramatic drop in the final hour of trading during Trump’s briefing when he mentioned a recession “may be” on the horizon that spooked the investors.
“Markets are veering wildly on any piece of news, whether optimistic or pessimistic. We're seeing the highest level of volatility I can remember,” said Euan Rellie, co-founder at investment bank BDA Partners in New York.
“Most of us think the markets are oversold, but they could drop further before they really stabilise and recover. I’m seeing plenty of hope and plenty of fear, but not much optimism out there yet.”
The stock markets have swung wildly in the past week, triggering so-called circuit-breaker trading halts designed to avert a free fall three times.
The House of Representatives on Monday evening passed for the second time legislation to mitigate the virus’ economic impact after technical corrections were made to the measure.
The bill would ensure workers can take paid sick leave or family leave, increase unemployment insurance and guarantee all Americans free Covid-19 diagnostic testing.
“The Trump administration is taking it seriously at last, and now doing a good job,” said Rellie. “We expect a big recovery once there’s good news about the number of cases peaking, or any medical advance.”
US retail sales fell in February, indicating consumer spending, the main driver of the economy, began to slow even before outbreak measures were put in place.
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