NEW YORK: Wall Street posted its best performance in nearly 90 years on Tuesday (Mar 25), as indices rallied on hopes that lawmakers would soon agree on a massive stimulus package to blunt the coronavirus' economic impact.
The Dow Jones Industrial Average surged 11.4 per cent rallying to end the session at 20,704.91, its biggest one-day percentage increase since 1933.
The tech-rich Nasdaq gained 8.1 per cent to close at 7,417.86, while the broad-based S&P 500 finished the day at 2,447.33, a gain of 9.4 per cent.
Investors rallied on expectations the US Congress was close to reaching an agreement on a stimulus package totaling US$2 trillion or higher to get Americans spending again and ensure businesses don't go under after the coronavirus forced entire cities and states to lockdown.
The details of the package are under negotiation, but Republicans who control the Senate have proposed sending out checks of as much as US$1,200 per-person and US$500 for each child, depending on income.
They also have proposed offering US$500 billion to corporations, including US$50 billion to revenue-strapped airlines, as well as US$300 in loans to small businesses.
"The market is expecting a major fiscal package to help cushion the downside caused by the shutdown of the economy," Quincy Krosby of Prudential told AFP, adding that provisions specifically directed at small businesses were encouraging investors.
"The key is to get the money out as quickly as possible and not wait," Krosby said.
Markets also were cheered by the G7's promise to do "whatever is necessary", and the Fed's announcement on Monday that it would inject unlimited money into the financial system and serve as the lender of last resort for troubled sectors.
The gains in New York were a turnaround from the rout seen the prior day, and were mirrored in Europe where Frankfurt's Dax index managed a double-digit rise by the close.
Grim survey data showing collapsing eurozone and UK business activity in March did not get in the way of Tuesday's recovery, as CMC Markets UK analyst David Madden said traders had been expecting the "brutal" survey data.
Meanwhile, investors gave a massive thumbs up to the Fed's pledge to essentially print money in a move not seen since the global financial crisis.
The central bank, which already had slashed its key lending rate to zero, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small- and medium-sized firms hammered by restrictions across the country.
AxiCorp's Stephen Innes called the Fed's move "the most significant monetary experiment in the history of financial markets", while the dollar beat a retreat from Monday's three-year peak against the euro.
NO BOTTOM YET
But at the end of the day, analysts could not bring themselves to call the end of the coronavirus market downturn.
"We're looking for a series of days with what we call 'higher highs'," meaning the market must keep its rally going, Krosby said.
Oliver Jones at Capital Economics said the markets' positive reactions to the Fed "belies the fact that central bank actions have yet to quell the strains showing up across the global financial system".
"It is hard to see a lasting recovery in equity prices until those strains subside," he said.
Edward Moya at OANDA sounded a similar note of caution, saying "investors will not be surprised if we see one last major sell-off before anyone will feel comfortable in calling a bottom".
KEY FIGURES AROUND 9PM GMT
New York - Dow: UP 11.4 per cent to 20,704.91 (close)
New York - S&P 500: UP 9.4 per cent to 2,447.33 (close)
New York - Nasdaq: UP 8.1 per cent to 7,417.86 (close)
London - FTSE 100: UP 7.5 per cent at 5,367.45 points (close)
Frankfurt - DAX 30: UP 11 per cent at 9,700.57 (close)
Paris - CAC 40: UP 8.4 per cent at 4,242.70 (close)
EURO STOXX 50: UP 9.2 per cent at 2,715.11 (close)
Tokyo - Nikkei 225: UP 7.1 per cent at 18,092.35 (close)
Hong Kong - Hang Seng: UP 4.5 per cent at 22,663.49 (close)
Shanghai - Composite: UP 2.3 per cent at 2,722.44 (close)
Brent North Sea crude: UP 2.0 per cent at $27.58 per barrel
West Texas Intermediate: UP 4.2 per cent at $24.33 per barrel
Euro/dollar: UP at US$1.0782 from US$1.0726 at 9pm GMT
Dollar/yen: UP at 111.32 yen from 111.23 yen
Pound/dollar: UP at US$1.1754 from US$1.1542
Euro/pound: DOWN at 91.75 pence from 92.93