Stocks rallied Tuesday as President Donald Trump promised he’s “going big” with plans to prop up the staggering economy through the coronavirus outbreak.
Besides the White House’s 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 new 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 policy makers.”
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 get 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 may 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.