The Dow Jones leaped as much as 1,000 points on Tuesday as promises of economic stimulus soothed a troubled stock market.
Wall Street is finally seeing the kind of monetary response it craved, and investors also cheered a glimmer of light in European coronavirus data.
All three of the major U.S. stock market indices enjoyed substantial gains on Tuesday.
Commodity markets saw some volatility amid a massive surge in the U.S. dollar. Crude oil (-5.8%) extended its slide, falling back into the $27 handle.
While the strong USD was terrible news for silver, the price of gold jumped 3% as already debt-laden Western powers announced whopping stimulus packages.
The Trump administration would like to send American adults a $1,000 check, with talk of an $850 billion fiscal injection.
In the U.K., Finance Minister Rishi Sunak announced they would do “whatever it takes,” with around $400 billion allocated for loans for businesses.
These promises of stimulus are a response to the darkening economic environment, which was highlighted by today’s weak retail sales data.
The headline figure contracted 0.5%. This reading was for February, prior to the U.S. implementing its earnest efforts to contain the coronavirus outbreak. March’s print will likely be considerably worse because many retailers have shuttered their stores.
The economic impact of the coronavirus will grow increasingly severe the longer it drags on. Donald Trump spooked the Dow Jones on Monday when he talked about the crisis festering till mid-Summer.
Confirming the likelihood of a drawn-out battle, Apple is no longer committed to reopening its U.S. stores in two weeks’ time. Instead, they will be closed indefinitely.
Boris Schlossberg at BK Asset Management outlined the cash flow issues affecting U.S. businesses in a recent note. He says large publicly traded corporations are faring considerably better than smaller companies.
Investors are essentially flying blind as the length of the containment is uncertain, and the economic impact of the health measures could be catastrophic.
In the U.S., for example, companies have enough cash on hand for about 60 days of payroll – but that figure applies only to the largest corporations rather than the 80% of small and medium-sized businesses which will in effect become insolvent if the quarantine lasts that long
U.S. coronavirus infection numbers continue to rise rapidly. The nation now has more than 5,700 infections, according to the latest John Hopkins data.
Some good news was finally seen in Europe, though, even as the European Union slammed its external borders shut for 30 days. Italy and Spain’s coronavirus infection rates showed a slight deceleration. Stock market bulls will be anxious to see if this trend holds.
Tuesday was relatively bright for the Dow 30, and risk-appetite supported dip-buying across the board.
Leading the Dow Jones was an astonishing 19% rally in Dow Inc. There were also impressive 10% gains for Walmart as it enjoys a panic-buying sales boom.
Microsoft (+6%) and Intel (+11.5%) highlighted the tech sector’s recovery. Apple powered through $250 with a 4% rally.
Yet Boeing stock (-5%) continues to struggle, as talk of a bailout does little to assuage fears about the dire economic straits that the company finds itself in.
Chevron lagged the broader index as oil prices fell, though Exxon Mobil was able to rise even despite its rating downgrade on Monday.