US stocks surge as Congress nears deal on US stimulus
Gains in risk assets follow an unprecedented move by the Federal Reserve to backstop large swaths of the financial system
New York — US stocks rallied, with the Dow Jones Industrial Average up over 9% for the first time since 2008, as investors rediscovered some appetite for risk with Congress looking close to an unprecedented spending bill to prop up the slumping economy. The dollar halted a 10-day rally.
The S&P 500 rebounded from the lowest level since 2016, poised to notch a third straight on Tuesday turnaround after starting the week with a rout. Senators are negotiating the final sticking points in a roughly $2-trillion stimulus bill to help the US economy get through the coronavirus pandemic, and House speaker Nancy Pelosi said she was hopeful a deal could be reached later on Tuesday.
“Any sign of positive news coming out of Washington or the different sides coming together creates a bit of positive sentiment across markets,” said Peter Essele, head of portfolio management for Commonwealth Financial Network.
The Stoxx Europe 600 Index also surged, led by insurers and industrial companies, even as data began to show the extent of economic damage to the region from the coronavirus pandemic. Benchmarks across Asia jumped, with Korea’s index soaring almost 9% after the government announced measures to stabilise markets.
The dollar fell against developed and emerging currencies alike, in a tentative sign of reduced stress after the greenback’s steepest appreciation since the global financial crisis and longest winning streak since 2012. European bonds tracked Treasuries lower.
About $26-trillion has evaporated from equity markets since mid-February, and investors have been left sifting the wreckage and weighing the chances of a lasting rebound. On the one hand, Wall Street has begun to argue that liquidations are nearing an end with real-money investors such as pension funds ready to step in, and there are signs of improvement in some of world’s regions that were hardest-hit by the coronavirus. On the other, the number of infections globally continues to accelerate and many of the largest economies are grinding to a halt.
Tuesday’s gain in risk assets follows an unprecedented move by the Federal Reserve to backstop large swaths of the financial system. Still, key gauges of US manufacturing and services in March fell the most on record, suggesting the deep toll the pandemic has already taken.
“Sentiment has improved, but to call it a turning point is too strong a word for now,” said James McCormick, global head of desk strategy at NatWest Markets. “It is more of a tug-of-war. Policy bazooka is in place, but will be fighting against very weak data and still worrying trends on Covid-19 data. We are more neutral on risk assets now.”
Elsewhere, emerging-market stocks jumped alongside their currencies. Gold extended recent a recent surge and industrial metals rallied. It was up 4.3% to $1,620.05/oz.
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