Stocks jump as Wall Street looks to coronavirus bill
By Aimee Picchi
Stocks opened sharply on Tuesday as investors weighed the Federal Reserve's vow to support key financial markets and prospects for a proposed relief bill in Congress to help soften the economic impact of the coronavirus.
The Dow jumped 1,136 points, or 6.1%, to 19,728 shortly after the start of trade. The broad-based S&P 500 jumped 5.6% and the tech-heavy Nasdaq rose 5.3%.
The Dow has lost 37% of its value through Monday since its most recent high in February, with investors spooked by the sudden shutdown of economic activity across the U.S. in reaction to the pandemic. With millions of workers expected to lose their jobs this month, lawmakers are working on a stimulus bill that would provide aid to individuals and families as well as hard-hit industries.
But despite those measures, economists say the U.S. is already in a recession and predict a historic surge in unemployment.
"We think the actions taken by the Fed are important steps aimed at easing financial market strains and will help ensure households and businesses of all sizes are supported through the crisis," Rubeela Farooqi, chief U.S. economist with High Frequency Economics, told investors in a note. "However, the immediate impact of a shutdown of most sectors of the economy will be large, not only in terms of lost output and revenue, but especially the loss of jobs."
On Monday, the Fed announced it will buy an unlimited amount of Treasury bonds and mortgage-backed securities with the goal of supporting "smooth market functioning." The central bank also said it will set up three new lending programs that will provide up to $300 billion by purchasing corporate bonds, buying a wider range of municipal bonds and purchasing asset-backed securities from a range of businesses.
Investors are also focused on what could be a $2 trillion federal rescue package that would provide health care and economic aid as much of the economy shuts down due to the coronavirus outbreak. The measure would provide a one-time payment of about $1,200 per individual, $2,400 for couples and $3,000 for family of four. The money would cut off at higher income levels.
An estimated $350 billion would go to small businesses to help avert mass layoffs . Companies with 500 or fewer employees could tap up to $10 million each in forgivable small business loans to keep paychecks flowing. The program would also provide eight weeks of assistance through federally guaranteed loans to qualifying employers who maintain payroll.
"Agreement over a U.S. fiscal package should also support sentiment when it comes," analyst with Capital Economics said in a research note. "But neither financial markets nor the wider economy are likely to see a sustained, significant improvement until the number of new coronavirus cases flattens off and that has yet to happen at the global level."
With reporting by The Associated Press.
First published on March 24, 2020 / 10:22 AM
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