NEW YORK (AP) — Stocks surged, recouping much of a historic plunge, after President Donald Trump announced new measures to fight the coronavirus.
The Dow Jones Industrial Average jumped 1,985 points, or 9.4%, its best gain since October 2008. Stocks doubled their gains in the last half-hour as Trump made his remarks.
The rally came at the end of a week of turbulent trading fueled by heightened fears that the fallout from the coronavirus could bring on a global recession.
Thursday’s drop was the worst since the Black Monday crash of 1987. Investors have been clamoring for strong action from the U.S. government to combat the economic impact.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below:
Stocks clawed back some of their recent losses Friday at the end of a brutal week of selling as the spreading coronavirus heightened fears of a global recession.
The gains, which came in yet another day of turbulent trading, followed the worst slide for the U.S. market since the Black Monday crash of 1987 and one of the worst drops for Europe on record.
An early surge in buying subsided around midday, but then regained momentum by mid-afternoon, leaving major indexes up about 3.3%. They had been up as much as 6% earlier. The Dow Jones Industrial Average was up more than 740 points. The Dow’s 10% drop a day earlier was its worst in more than 30 years.
Investors have been clamoring for strong action from the U.S. government to combat the economic impact of the virus outbreak. News that the White House and Congress are close to announcing an agreement on a package to provide sick pay, free testing and other resources helped boost the market.
“We’re finally getting that a little late to the party, but it’s better to be late to the party then not to come to the party,” said Ryan Detrick, senior market strategist at LPL Financial. He said the stimulus plan should help cushion the financial effects on people and businesses.
Treasury Secretary Steven Mnuchin said on CNBC that the two sides were “very close to getting this done.” President Donald Trump was expected to hold a news conference later Friday.
The market’s rout intensified this week amid a torrent of cancellations and shutdowns worldwide. Business closures have fueled fear that a severe pullback in consumer and business spending will tip the U.S. economy into a recession and wreck corporate profits.
Meanwhile, Warren Buffett said Friday that the annual shareholder meeting for Berkshire Hathaway will be streamed live in early May without any attendees, apart from maybe a select number of journalists. The meeting normally draws a crowd to rival professional sporting events.
Even with Friday’s pickup, the stock market was on track for its worst week since October 2008, during a global financial crisis. In just a few weeks, U.S. stocks have wiped out all the gains made during 2019, one of the best years for the market in decades. All the major indexes are in what traders call a bear market.
The virus has infected over 137,000 people worldwide. More than 5,000 have died, but half of those who had the virus have already recovered. The pandemic’s new epicenter is Europe. In the United States, cases have topped 1,600, while 41 people have died, according to the Centers For Disease Control and Prevention.
Friday’s rally was broad, with technology stocks accounting for a big slice of the gains. Shares in cruise line operators, airlines and hotels — among the hardest-hit stocks as people canceled vacations and companies shut down business trips — headed higher.
Investors’ anticipation of a government stimulus effort and a rate cut by the Fed next week likely put traders in a buying mood, though it’s not unusual for stocks to rebound a day after a big decline, something Wall Street calls a “dead cat bounce.”
“I don’t know if I would call this a dead cat bounce, but I would certainly not call it a trend,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “Maybe it reflects a little more optimism that we’re getting a fiscal impulse that will help support the economy, and by extension, the market while we get through this transitory period of economic weakness.”
On Thursday, the Federal Reserve unveiled a massive short-term lending program to try to help smooth trading in U.S. Treasurys. Many economists expect the Fed will move to cut interest rates by a full percentage point, to nearly zero, at its meeting of policymakers next Wednesday.
This week’s historic sell-off helped to wipe out most of the big gains since President Trump took office in 2017. After hitting an all-time high on Feb. 19, the S&P 500 fell more than 20%, officially ending Wall Street’s unprecedented bull-market run of nearly 11 years. The slide into a bear market has been the fastest since World War II.
The selling has been so swift and sharp that there remains the potential for a significant bounce after the virus and its impact begin to recede, Detrick said. The economy was already on solid footing and well-known companies like Disney and Apple were could help lead a recovery.
He also said there could be a recession on the horizon, but it would likely be mild at this point. “It could be a shallow, quick, violent, scary recession, but one that bounces back quickly,” Detrick said.
For most people the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illnesses, including pneumonia. The vast majority of people recover from the virus in a few weeks.
For now, investors must wait for more information.
“What markets are trying to do is understand what the cycle of the virus is, and then the human reaction to it,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta.