Stocks surged Tuesday, recouping some losses as market participants anxiously awaited further fiscal stimulus measures from policymakers to combat the economic fallout from the coronavirus pandemic.
During pre-market trading, contracts of each of the S&P 500, Nasdaq 100 and Dow Jones Industrial Average rallied about 5% to hit their upper trading limits, which are established each day by CME Group. The indices were pinned to “limit up” as of Tuesday morning, with about two hours to go until the opening bell.
Monday was yet another ugly day on Wall Street, which saw the Dow erase nearly all of its gains from the presidential election day in November 2016. It capped a second straight session in the red after the U.S. Senate again failed to approve a nearly $2 trillion economic rescue package, disappointing investors hoping to see a speedy authorization of the relief legislation.
Late Monday, House Speaker Nancy Pelosi unveiled a $2.5 trillion coronavirus economic rescue package as a countermeasure to the Senate’s polarized debate. She signaled optimism on Tuesday that the warring parties were closing in on an agreement.
The repeat stalling of the Senate bill came just hours after the U.S. Federal Reserve unleashed its own set of new and extensive measures to help keep corporate credit flows and other critical parts of financial markets functioning smoothly. The new program included unprecedented measures from the Fed, including purchases of eligible corporate bonds from companies and exchange-traded funds, and purchases of commercial mortgage-backed securities.
“With the Fed now all-in and then some, the onus will be largely on fiscal policy to provide any further support for consumers and businesses,” Ben Ayers, senior economist for Nationwide, said in an email Monday. “Early signals suggest widespread layoffs and cutbacks by businesses with the sudden economic stop seen across the globe, necessitating further action to cushion the harm to the economy.”
Damage from the outbreak has taken a massive toll on small and local businesses, as well as the country’s largest corporations, as residents practice social distancing and shun leisure and travel. These huge, if temporary, societal changes have been aimed at slowing the spread of the coronavirus, which has sickened more than 46,000 U.S. citizens as of Tuesday morning, according to Johns Hopkins data.
The ensuing business disruptions and economic uncertainty has weighed heavily on risk assets, with the S&P 500 tumbling by about 34% from its recent closing high on February 19.
11:15 Gold rallies, suggesting investors are done selling (for now)
One of the more curious features of the current market volatility has been gold (GC=F), which hasn’t behaved much like a safe-haven as traders liquidate positions. The Fed’s “Big Bertha” stimulus, which several market commentators have branded “QE-infinity” means that bullion’s sell-off may be done in the short term (especially with the dollar weakening), and investors are starting to focus on the ugly fundamentals to come.
10:40 a.m. ET: Air travel industry to suffer $252 billion revenue hit in 2020 as companies face ‘gravest crisis’: IATA
The International Air Transport Association (IATA) again revised its expectations for the air travel industry’s revenue damage induced by the coronavirus outbreak, and now sees an even deeper reduction over last year.
Air passenger revenue could drop by $252 billion in 2020, representing a 44% decline over 2019, IATA said in a statement Tuesday. Global airlines will require $200 billion in liquidity support “simply to make it through,” the organization said.
At the beginning of March, IATA saw $113 billion in lost revenue this year for the passenger airline industry. However, this prediction came before global authorities began imposing strict travel restrictions that undercut the international air travel market.
“The airline industry faces its gravest crisis. Within a matter of a few weeks, our previous worst case scenario is looking better than our latest estimates,” IATA CEO Alexandre de Juniac said in a statement. “But without immediate government relief measures, there will not be an industry left standing.”
Emily McCormick,Javier E. David and Nishant Mohan