Global markets volatile after historic dive on Wall Street

An electronic board at the Hong Kong Stock Exchange on Monday.
An electronic board at the Hong Kong Stock Exchange on Monday.
(Vincent Yu / Associated Press)

Stocks rallied Tuesday as President Trump promised he was “going big” with plans to prop up the staggering economy through the coronavirus outbreak.

Besides the White House proposal, which could approach $1 trillion, the Federal Reserve also announced its latest emergency move to get markets running more smoothly. The S&P 500 climbed 6% to claw back a little less than half of its historic loss from the day before.

Even a 5% move used to be extremely rare, but it’s become the norm this month as investors see a recession as increasingly likely, if not already here. Many professional investors expect the market’s big swings in both directions to continue until health experts get the coronavirus in check.

“Government tends to show up late to the party with a bazooka,” said Barry Bannister, head of institutional equity strategy at Stifel. “It’s a bit of an overreaction, but that’s to be understood as normal for policymakers.”


Trump wants the government to send checks to Americans in the next two weeks to help support them while chunks of the economy come closer to shutting down, Treasury Secretary Steven Mnuchin said Tuesday.

Mnuchin briefed Senate Republicans on the proposal, which could also include $50 billion for the airline industry and $250 billion for small businesses. The travel industry has been among the industries hardest hit by the outbreak. Planes sit grounded and hotels and casinos have shut their doors.

Investors have been waiting for Washington to offer more aid for the economy. After flipping between gains and losses Tuesday morning, stocks turned decisively higher after the Federal Reserve revived a program first used in the 2008 financial crisis to help companies get access to cash for very short-term needs.

“There are still a lot of questions in the mind of the market as to what will be enough,” said Robert Haworth, senior investment strategist at U.S. Bank Wealth Management. “It’s a start, but there’s still a lot to be determined.”


Ultimately, investors say they need to see the number of infections slow before markets can find a bottom. Worldwide cases now exceed 190,000. In the San Francisco area, nearly 7 million people were all but confined to their homes in the nation’s most sweeping lockdown.

For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough, and those with mild illness recover in about two weeks. But severe illness including pneumonia can occur, especially in older people and those with existing health problems, and recovery could take six weeks in such cases.

Uncertainty about how badly the economy will be hit by the coronavirus has put the market on a roller coaster, with steep losses giving way to sharp gains, only to be wiped out again, sometimes all in the same day.

“I don’t think we’re going to be able to trust movements in the market for some time,” said Tom Martin, senior portfolio manager with Globalt Investments.

Trading was unsettled around the world. European stocks swung from gains to losses and back to gains. South Korean stocks fell to their fifth straight loss of 2.5%, but Japanese stocks shook off an early loss to edge higher.

The Dow Jones Industrial Average see-sawed through the day. It went from up 600 points to down 300 to up 1,190 and then pulled back again. It ended the day up 1,048.86 points, or 5.2%, at 21,237.38. A day earlier, it lost nearly 3,000 after Trump said a recession might be on the way.

The S&P 500, which dictates the movements of workers’ 401(k) accounts much more than the Dow, is still 25.3% below its record set last month. It’s close to where it was at the start of 2019, before one of the best years for stocks in decades.

Stocks have had a few rebounds since the market began selling off in mid-February on worries that COVID-19 will slam the economy and corporate profits. But all have ended up short-lived. The S&P 500 has had four days in the last few weeks where it has surged more than 4%, something that did not happen at all last year. Each time, it has slumped more than 2.8% the following day.


The virus has spread so quickly that its effects haven’t shown up in much U.S. economic data yet. A report on Monday about manufacturing in New York state was the first piece of evidence that manufacturing was contracting due to the outbreak. On Tuesday, a report showed that retail sales weakened in February, when economists had been expecting a gain.

“The global recession is here and now,” S&P Global economists wrote in a report Tuesday.

They say initial data from China suggest its economy was hit harder than expected, though it has begun to stabilize. “Europe and the U.S. are following a similar path,” the economists wrote.

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