US stocks surged on Tuesday as congressional leaders said they were close to a deal on an unprecedented financial stimulus package to combat economic disruption expected as the coronavirus pandemic keeps businesses closed.
The Dow Jones Industrial Average jumped nearly 2,000 points to close up 10.4 per cent, its best percentile gain since 1933. The S&P 500 stock index was up 8.7 per cent, while the Nasdaq composite soared 7.7 per cent.
Stocks continued to build on the gains throughout the day. The turnaround followed a volatile session on Monday that sent stocks swooning after lawmakers failed to reach agreement on a rescue bill twice in as many days.
US President Donald Trump said during an interview with Fox News on Tuesday that he was considering reopening the economy within weeks, not months, dismissing criticism from medical experts, who warn that resuming business-as-usual might backfire.
“I’d like to see the country re-opend up by Easter,” on April 12, he said. “We cannot let the cure be worse than the problem.”
It was unclear how Trump would achieve that, however, since the stay-at-home and business-closing orders that have shuttered New York, California and elsewhere have been issued by state and local officials, not the federal government.
Lawmakers are negotiating the final details in a stimulus plan that mounts to about US$2 trillion to help the US economy go through the pandemic, which has so far had more than 50,600 cases confirmed in the country, with more than 600 deaths.
Senate Republicans and House Democrats are still battling on what portions should go to businesses or individuals. House Speaker Nancy Pelosi perhaps provided the markets their most hopeful news when she told CNBC on Tuesday morning that she believed a deal could be reached soon.
“I think there is real optimism that we could get something done in the next few hours,” she said.
The plan is said to include payments of US$1,200 to many American adults and another US$500 for children. It contains US$850 billion in loan and assistance programs for hard-hit businesses such as airlines, hospitality industry and small businesses. The programmes also include help for hospitals and health care providers, as well as cities and states.
Investors were also waiting for the release of March data on US manufacturing and services industries.
The optimism among US investors followed gains in European and Asian stocks overnight.
The Hang Seng Index finished with a 4.5 per cent gain at 22,663.49. The Shanghai Composite ended 2.3 per cent higher.
“Investors in Asia are focusing on the latest QE move [qualitative easing by the US Federal Reserve]. They believe Asia stocks will benefit from improving liquidity,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
He said that traders were bottom-fishing for stocks battered by the pandemic, leading to the big gains, but he did not see the rally being sustained.
South Korea’s Kospi closed up 8.6 per cent, and the tech-heavy Kosdaq jumped 8.3 per cent. Japan’s Nikkei 225 closed with a 7.1 per cent gain.
Australia’s S&P/ASX200 closed up by 4.2 per cent while New Zealand’s S&P/NZX50 shot up 7.2 per cent at the close. Singapore’s Straits Times Index rose 6.2 per cent.
We learn something every day, and lots of times it’s that what we learned the day before was wrong.