NEW YORK: Wall Street stocks finished a roller-coaster session sharply higher Tuesday as oil prices bounced while the Trump administration continued to promise relief measures to offset the economic hit from coronavirus.
The day after suffering its worst session in more than 11 years, the Dow piled on more than 1,150 points, or nearly 5%, to finish at 25,018.16.
Elsewhere, Brazil’s Ibovespa index also enjoyed a good bounce back, while European bourses endured another losing session.
Analysts warned of more volatility ahead amid uncertainty of how much the virus will spread in the United States, the extent it further dampens activity in the world’s biggest economy and the robustness of the US policy response.
“It’s like winding up a rubber band. The more you wind it, when you let go, the more it pops,” LBBW’s Karl Haeling said of Tuesday’s jump amid heightened volatility.
“A lot of the uncertainty goes to the root of the virus itself.”
The virus has reached more than 117,000 people and caused more than 4,200 deaths, with the most severe impacts thus far on China and Italy, which was on lockdown following an announcement by the Italian government late Monday.
Shares in Milan ended 3.3% lower, despite Italy airing plans to allow families to suspend mortgage and some tax payments and seek permission from Brussels to boost exceptional spending beyond the €7.5 billion planned to help businesses hurt by a sharp drop in tourism over the past month.
How bad in US?
The hit in the United States thus far has included the cancellation of events such as the South by Southwest festival in Austin and BNP Paribas tennis tournament in California.
On Tuesday, the New York International Auto Show was rescheduled to late August from April due to virus fears.
“The assumption is that it’s certainly going to hit the US economy, but how much is unknown,” said Briefing.com analyst Patrick O’Hare.
“You don’t know how extensive the nesting effect will be” in the US, he added.
O’Hare said the cancellations in the US dent revenues for airlines, hotels and other industries that rely on large events, while analysts expect a hit to employment and spending tied to the petroleum sector in light of crashing oil prices.
US President Donald Trump said in a midday appearance at the White House that he plans to provide assistance to airlines and cruise companies, two especially hard-hit industries, boosting equities in both those sectors.
There were also reports in US media that Trump is considering freezing payroll taxes on workers and offering some form of relief to US shale producers, which face significant challenges after a brutal drop in oil prices.
Analysts said Tuesday’s rally was not surprising given market weakness over the last few weeks, especially Monday’s rout.
They also pointed to strengthened investor sentiment following a significant jump in oil prices and a bounce in US Treasury yields from all-time lows.
The rise in oil prices came as Russian Energy Minister Alexander Novak told state-run Rossiya 24 television channel that Moscow remains open to cooperation with Saudi Arabia and the rest of Opec to stabilise the oil market, saying “I want to say the doors aren’t closed”.
The remarks came a day after oil prices suffered the biggest single-day drop since 1991 as Saudi Arabia cut crude prices, sparking fears of a war for market share with potentially devastating effects on smaller US producers.