Major benchmarks rebounded on Monday as investors expect central bank to ease monetary policy and increase liquidity to cushion impacts of coronavirus over the global economy.
The Dow Jones Industrial Average (DJI) rose 1,293.96 points, or 5.1%, to close at 26,703.32 and the S&P 500 added 136.01 points, or 4.6% to close at of 3,090.23. While, the Nasdaq Composite Index closed at 8,952.16, gaining 384.80 points, or 4.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 0.9% to close at 33.12. Advancing issues outnumbered declining one for a 4.32-to-1 ratio on the NYSE and a 2.69-to-1 ratio on the Nasdaq favored advancers.
How Did the Benchmarks Perform?
The Dow made its largest one-day percentage rise since March 23, 2009, on Monday. All the three major benchmarks rose more than 4%, however, the S&P 500 and the Nasdaq’s rally was led by a 9.3% rise in Apple Inc.’s (NASDAQ:AAPL) shares. Apple that carries a Zacks Rank #2 (Buy) took its largest one-session leap since 2008. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In total, 14 billion shares changed hands on the U.S. trading exchanges compared with a 9.5 billion-share average for the last 20 days. And overall, the S&P index recorded no new 52-week highs and 18 new lows. On the other hand, Nasdaq recorded 27 new highs and 1049 new lows.
Market Rebounds on Interest Rate Cut Speculations
Last week, Federal Reserve Chairman Jerome Powell said that central bank will be “closely monitoring developments” in Coronavirus and analyze its impact on the economic outlook. This led investors to speculate that the Fed may make at least 50-basis point cut in the next regular monetary-policy meeting, scheduled for March 18.
According to the CME FedWatch Tool markets are reflecting a 50-basis point reduction on Mar 18, and the tool is giving off a 100% reading in terms of rate cut probabilities.
So far, the virus has taken 3,119 lives and infected more than 90,900 people worldwide. In the United States, six death from Covid-19 has raised fears of a wider spread of the disease domestically.
With factories on lock down and companies like Twitter, Inc. (NYSE:TWTR) , Hewlett Packard Enterprise Company (NYSE:HPE) and more asking employees to work from home or have closed offices to avoid the risk of infections. In fact, the World Health Organization (WHO) said that coronavirus is now spreading more rapidly outside China than within the country, however, the outbreak can still be contained.
Economic News
On Monday, the Institute for Supply Management (ISM) reported that its manufacturing index came in at 50.1, falling behind the estimate of 50.5 and lower than previous months’ value of 50.9. The report states that manufactures have reported supply bottlenecks caused by coronavirus is creating hurdles in getting parts and raw materials.
On the other hand, U.S. construction spending increased1.8%, highest in nearly two years, hitting a record high in January and far above the consensus estimate of 0.6%.
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