NEW YORK (REUTERS) - The Dow soared in its biggest one-day percentage gain since 1933 on Tuesday (March 24) after US lawmakers said they were close to a deal for an economic rescue package in response to the blows from the coronavirus outbreak, injecting optimism following the biggest selloff since the financial crisis.
All three main US stock indexes rebounded strongly from Monday's brutal selloff as the coronavirus outbreak forced entire nations to shut down.
Senior Democrats and Republicans said on Tuesday they were close to a deal on a US$2 trillion (S$2.9 trillion) stimulus Bill, aimed at providing financial aid to Americans out of work and help for distressed industries.
The expected legislative measure adds to aggressive action announced by the Federal Reserve in recent days, including the purchase of corporate bonds and announcing that the US central bank will make direct loans to companies.
King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco, said expectations on the stimulus Bill were driving optimism on Wall Street, but he said his firm was still waiting to buy back into the market.
"With all of this stimulus, we just need a catalyst to spark the fire," Lip said. "That spark will be a peaking of the cases, and when it starts to come down, I think that's when everything gets lit up."
Investors were also pleased after President Donald Trump said on Monday that he was considering how to restart parts of business life when a 15-day shutdown ends next week, even as the highly contagious virus spreads rapidly and poorly equipped hospitals struggle with a wave of deadly cases.
A separate proposal in the US House of Representatives to grant airlines and contractors a US$40 billion bailout lifted the S&P 1500 airlines index by 15 per cent.
The severity of the spread of Covid-19 and the expectations of aggressive stimulus measures have whipsawed financial markets and ended an 11-year bull market.
Boeing powered the Dow's gains, jumping nearly 21 per cent after chief executive Dave Calhoun said the planemaker expected the 737 Max jet to return to service by mid-year. Its shares have lost nearly two-thirds of their value so far in 2020.
Data on Monday showed US business activity hit a record low in March, bolstering expert views that the economy was already in a recession.
Traders were still weighing the uncertainty of the path of the coronavirus outbreak.
"We don't know how long it's going to take to peak. We don't know how to treat it. We don't have a vaccine. So all of those uncertainties are causing a myriad of aftershocks," said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.
The Dow Jones Industrial Average soared 11.37 per cent to end at 20,704.91 points, while the S&P 500 jumped 9.38 per cent to 2,447.33. The Nasdaq Composite rallied 8.12 per cent to 7,417.86.