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Dow, S&P buoyed as stimulus nears

By SCOTT REEVES in New York | chinadaily.com.cn | Updated: 2020-03-26 05:58
[Photo/Agencies]

Two of the three major US stock market indices rose Wednesday as Congress and the White House announced agreement on a $2 trillion stimulus package intended to help individuals and industries pounded by the economic downturn resulting from the coronavirus pandemic.

Stocks pulled back, however, in the session's final minutes after US Senator Bernie Sanders, a Democratic presidential candidate, said he would "put a hold on this bill until stronger conditions are imposed on the $500 billion corporate welfare fund", according to cnbc.com.

The Dow Jones Industrial Average gained 495.64 points for the day, or 2.39 percent, and closed at 21,200.55. The S&P 500 rose 28.23 points, or 1.15 percent, and closed at 2,475.56. The Nasdaq fell 33.56 points, or 0.45 percent, and closed at 7,384.30.

The Dow at one point was up more than 1,300 points. The Nasdaq turned negative just before the closing bell as Facebook, Amazon, Apple, Netflix and Google's parent Alphabet fell.

Still, the Dow and the S&P 500 posted gains on two consecutive days for the first time since February.

It's not clear if the market's strong performance in the last two days is building a foundation for extended gains or if investors are buying beaten- down stocks at good prices and plan to pocket profits quickly. The decline at the end of the trading day suggests profit-taking.

Some analysts believe there's more volatility ahead as high trading volumes play out against the uncertain course of spread of the coronavirus, also called COVID-19.

"Coming on the heels of the central banks, there is increasing optimism that politicians are starting to understand the scale of the economic stop coming -our way as the death toll across Europe and the US continues to rise," Michael Hewson, chief market analyst at CMC Markets UK, said in a research note.

He said bear markets can experience "sharp and violent counter moves to the upside" and cited the 2008 financial crisis created by the collapse of the subprime mortgage market.

The stock market's recent resurgence therefore "could be another bull trap, and an opportunity to sell at better levels, if politicians disappoint", Hewson wrote.

The Dow closed at a record high of 29,551.42 on Feb 12, but concern about the coronavirus spooked investors, and the blue-chip index this month plunged into bear market territory. It's trying to climb back and rose 2,2112.98 points, or 11.3 percent, on Tuesday – the biggest gain since March 1933.

On Wednesday, Boeing continued its resurgence and gained 23.97 percent. The aircraft manufacturer lost orders following the worldwide grounding of the 737 MAX stemming from two crashes that killed a total of 346 passengers and crew.

Companies and individuals have cut back on travel amid fear of the spreading coronavirus. Commercial airlines are expected to receive payments as part of the stimulus package.

As a result, United Airlines rose 10.91 percent. American Airlines added 10.56 percent. Delta climbed 15.81 percent.

Michael Levitt, a Nobel Prize-winner and a biophysicist at Stanford University, analyzed the outbreak and correctly concluded that China would recover faster than many predicted.

He sees a similar outcome for the US and the rest of the world.

"What we need is to control the panic," he told the Los Angeles Times. "We're going to be fine."

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