U.S. stocks rebounded Thursday thanks to solid gains in tech shares and the continued economic response to coronavirus by the federal government.
After shaking off a rocky start, the market finished the day back above the 20,000 point mark, although trading remained bumpy but nothing like the wild swings seen in recent weeks.
The Dow Jones Industrial Average gained 188.27 points, or 1% to 20,087.19. The S&P 500 closed slightly higher from the previous day, up 11.29 to 2,409. The NASDAQ was up 160.73 or 2% to 7,150.58.
Investors were cautiously optimistic after seeing more steps by the Federal Reserve and other central banks as well as governments to support credit markets and the economy.
Still, the devastating impact of the coronavirus outbreak is starting to show itself in economic data. The price of crude oil rebounded sharply after plummeting a day earlier.
The Dow started Thursday 400 points down despite the massive response by the federal government to slow the spread of the coronavirus and protect the American economy.
The early losses were far less dramatic than the market has seen in recent days, but come after a more than 1,300 point drop Wednesday in the Dow, which has now given up nearly all of its gains since President Trump was elected in 2016.
The stock markets appeared largely subdued as a new labor report showed jobless claims spiked to 281,000 last week, the highest level since September 2017, according to reports.
Around the world Thursday, markets continued to appear fragile after days of massive volatility, as investors digested new financial support measures, including the European Central Bank's promise to funnel 750 billion euros — equivalent to $817 billion — into financial markets.
Investors were rushing to convert holdings to cash, bracing for a prolonged coronavirus-induced recession.
The situation
As big swaths of the economy retrench while much of society comes to a halt in an attempt to slow the spread of the virus, investors have been clamoring for help from central banks and other authorities around the world to support the economy until it can begin to reopen.
They got a big shot of that Tuesday, when the Trump administration briefed lawmakers on a program that could surpass $1 trillion and the Fed announced its latest moves to support markets.
What’s being done
On Wednesday, President Donald Trump signed an aid package, approved earlier Wednesday by the Senate, to guarantee sick leave to workers who fall ill. Trump’s authority under the 70-year-old Defense Production Act gives the government more power to steer production by private companies and try to overcome shortages in masks, ventilators and other supplies.
Late on Wednesday, the Federal Reseve said it will establish an emergency lending facility to help unclog a short-term credit market that has been disrupted by the viral outbreak. Around the same time, the European Central Bank launched a new, expanded program to buy financial assets in a bid to calm markets. The 750 billion euros in purchases are aimed at keeping borrowing costs down and making sure the bank’s low rates get through to the economy.
Why is this happening
Investors are struggling with uncertainty about how badly the economy is getting hit, how much profit companies will make and how many companies may go into bankruptcy due to a cash crunch.
Even prices for longer-term U.S. Treasurys, which are seen as some of the safest possible investments, fell as investors sold what they could to raise cash. That pushed the yield on the 10-year Treasury higher, to 1.13%. It had recently dropped below 1% for the first time ever.
The mayhem is creating a “cash crunch,” that is putting pressure on financial institutions, said Jackson Wong of Amber Hill Capital in Hong Kong.
“That's why the financial markets are performing so badly,” Wong said.
What’s next
The New York Stock Exchange said late Wednesday it will temporarily close its iconic trading floor in lower Manhattan and move to all-electronic trading beginning Monday as a precautionary step amid the coronavirus outbreak.
Oil, gold, commodities
Benchmark crude oil rose $4.85, or 23.8%, to close at $25.22 a barrel Thursday. Brent crude oil, the international standard, rose $3.59, or 14.4% to close at $28.47 a barrel.
Wholesale gasoline rose 5 cents to 69 cents a gallon. Heating oil rose 9 cents to $1.04 a gallon. Natural gas rose 5 cents to $1.65 per 1,000 cubic feet.
Gold rose $1.40 to $1,479.30 an ounce, silver rose 36 cents to $12.13 per ounce and copper rose 3 cents $2.19 per pound.
The dollar rose to 110.67 Japanese yen from 107.98 yen on Tuesday. The euro fell to $1.0673 from $1.0873.
Around the world
After opening higher, European stocks were trading lower, with Germany's DAX shedding 0.7% to 8,386.11. The CAC 40 in Paris fell 0.4% to 3,738.37. Britain's FTSE 100 fell 1.5% to 5,006.56.
The futures for the Dow were down 1.5% and those for the S&P 500 were 1.4% lower.
Signs that the outbreak's impact will be far reaching and prolonged have undermined efforts to staunch the bloodletting on the markets.
Even prices for investments seen as very safe, like longer-term U.S. Treasurys, have been slumping as investors rush to raise cash.
Australia's S&P ASX/200 declined 3.4% to 4,782.90 after the central bank announced it was cutting its policy rate by 0.25 percentage point to a record low 0.25%, among other measures.
“It's amazing how desensitized we've become to central banks' dropping huge numbers and massive amounts of cash in the markets' laps," Stephen Innes of AxiCorp said in a commentary.
Japan's Nikkei 225 index gave up 1.0% to 16,552,83, while in South Korea, the Kospi sank 7.5% to 1,471.61. Hong Kong's Hang Seng index slipped 2.6% to 21,709.40, and the Shanghai Composite index shed 0.9% to 2,704.89.
India's Sensex sank 2.7% and Taiwan's benchmark fell 5.8%. Shares in Southeast Asia also fell.
The dollar was at 109.71 Japanese yen, up from 108.07 yen late Wednesday. The euro fell to $1.0752 from $1.0913.
— ArLuther Lee contributed to this report for The Atlanta Journal-Constitution
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