Stocks on Wall Street soared Wednesday as governments and central banks around the globe took more aggressive measures to fight the coronavirus outbreak and its effects on the economy.
The Dow Jones industrial average leaped 1,173.45 points, or 4.5%. The Standard & Poor’s 500 index rose 4.2%. The tech-heavy Nasdaq climbed 3.8% and now has a slight gain for the year.
The gains more than recouped the market’s big losses from Tuesday as Wall Street’s wild, virus-fueled swings extended into a third week.
Stocks rose sharply from the get-go Wednesday, led by big gains for healthcare stocks, after Joe Biden solidified his status as a contender for the Democratic presidential nomination. Investors see him as a more business-friendly alternative to Sen. Bernie Sanders.
The rally’s momentum accelerated after House and Senate leaders reached a deal on a bipartisan $8.3-billion bill to battle the coronavirus outbreak. The measure’s funds would go toward research into a vaccine, improved tests and drugs to treat infected people.
Investors were also expecting other central banks to emulate the Federal Reserve’s Tuesday surprise move to slash interest rates by half a percentage point in hopes of protecting the economy from the virus outbreak’s economic fallout. Canada’s central bank cut rates Wednesday, also by half a percentage point and citing the virus’ effect.
“The fact that you get an $8-billion bill, that’s money that will be spent, hopefully, on something that really will have an impact on mitigating the effects on the economy,” said Tom Martin, senior portfolio manager at Globalt Investments.
Some measures of fear in the market eased. Treasury yields rose but were still near record lows, a sign that the bond market remains concerned about the potential for economic pain. Companies around the world are already saying the virus outbreak is sapping away earnings via supply-chain disruptions and weaker sales.
Even though they know lower interest rates will not halt the virus’ spread, many investors want to see central banks and other authorities do what they can to lessen the economic damage.
“Monetary policy can only take us so far, but at least it’s a step,” said Jack Ablin, chief investment officer at Cresset. “Investors will take comfort in coordinated central bank action. I take comfort in knowing this isn’t the plague. We’ll eventually get through this.”
The Bank of England has a March 26 meeting on interest rates. The European Central Bank and others around the world have already cut rates below zero, but economists say they could make other moves, such as freeing up banks to lend more.
Healthcare stocks in the S&P 500 jumped 5.8%, the biggest gain among the 11 sectors that make up the index. UnitedHealth Group and Cigna both jumped 10.7%. Anthem soared 15.6%, the biggest gainer in the S&P 500. A Biden nomination would be more welcome on Wall Street than a nod for Sanders, who is campaigning on a proposal to enact “Medicare for All.”
“It’s probably a trend toward more of the same in terms of the market and the regulatory and business environment,” Ablin said. “I don’t think investors are looking for revolution.”
Data released Wednesday painted a U.S. economy that was still holding up, at least as of last month. The country’s services industries grew faster last month than economists expected, according to a report from the Institute for Supply Management. Hiring at private employers was stronger than expected in February, according to a report from payroll processor ADP, though slower than January’s pace. That could be an encouraging sign for the comprehensive jobs report coming from the government at the end of the week.
The yield on the 10-year Treasury rose Wednesday to 1.06% from 1.01%. The two-year Treasury yield fell to 0.69% from 0.71%.
Benchmark crude oil fell 40 cents to $46.78 a barrel. Gold fell $1.40 to $1,643 an ounce.