US close: Stocks bounce following stimulus announcement
Pfizer Inc.
$25.39
11:04 18/04/24
Wall Street stocks recorded some solid gains on Tuesday as the US looked to recover from the carnage seen in the previous session.
Dow Jones I.A.
37,775.38
04:30 15/10/20
At the close, the Dow Jones Industrial Average was up 5.20% at 21,237.38, while the S&P was 6.00% firmer at 2,529.19 and the Nasdaq Composite saw out the session 6.23% stronger at 7,334.78.
The Dow closed 1,048.86 points higher on Monday as stocks recorded some gains following its third-worst day ever in the previous session after the President said the US "may be" moving headfirst into a recession.
The upward moves came after Donald Trump tweeted: "The United States will be powerfully supporting those industries, like Airlines and others, that are particularly affected by the Chinese Virus. We will be stronger than ever before!" However, Trump also warned that the crisis could stretch as far as August, noting that the White House could potentially be looking at locking down "certain areas".
The Federal Reserve announced measures to help companies struggling to get short-term funding as a result of the outbreak, while investors also cheered plans that indicated the White House could inject $1trn into the US economy to cushion the blow of the coronavirus.
More stimulus needed?
Treasury Secretary Steven Mnuchin said the government was also considering directly sending checks to Americans in the next two weeks. "Americans need cash now," he said. He also noted that corporations would be able to defer tax payments of up to $10m while individuals could defer up to $1m in payments to the Internal Revenue Service.
Treasury yields surged on the news, with the 10-year US rate jumping breaking back above 1%.
Former Minneapolis Fed chief Narayana Kocherlakota wrote in a Bloomberg opinion piece that the US would need a bigger stimulus package, worth $2.5trn, because the drag on growth would extend until a coronavirus vaccine was ready, which he said that experts believed might take until late 2021.
As an aside, on Tuesday evening AFP reported that Germany's CureVac believed a vaccine was possible by autumn 2020.
Elsewhere on the macro front, US retail sales undershot forecasts last month and although economists said that they would likely be revised higher, they were also quick to warn that sharp drops in consumer spending lay ahead.
According to the Department of Commerce, in seasonally adjusted terms, sales volumes shrank at a 0.5% month-on-month pace in February to reach an annualised pace of $528.11bn. The average consensus forecast was for a rise of 0.2%.
Elsewhere, industrial production in the States grew more quickly than expected in February despite weakness in the mining sector.
The Commerce Department said that total output jumped at a 0.6% month-on-month pace last month (consensus: 0.4%). However, the better-than-expected print was more than offset by a downward revision to January's print from a 0.3% drop on the month to 0.5%.
Lastly, the Commerce Department said on Tuesday that a modest decrease in business inventories had taken place in the US during January.
The Commerce Department revealed that business inventories had edged down by 0.1% in January after coming in unchanged in December, in line with consensus estimates.
And Reuters reported that the Federal Reserve was planning to reinstate a facility previously used during the GFC to improve liquidity in a key short-term funding markets. An announcement about a reintroduction of the Commercial Paper Funding Facility could be made as early as Tuesday.
In corporate news, Amazon announced it would be cancelling all "non-essential" deliveries, while Netflix shares were up as user numbers looked set to increase as a result of those taking steps to self-isolate.