By Yasin Ebrahim
Investing.com – The Dow rebounded from its biggest one-day rout since the 1987 market crash as the Trump administration stoked hopes of a major stimulus package to tackle the Covid-19 outbreak.
The Dow jumped 5.2%, or about 1,049 points, theS&P 500 gained 6% and the Nasdaq Composite added 6.2%.
In an effort to shore up the economy amid fears the Covid-19 outbreak will bring about a recession, the Trump administration is widely believed to put forward proposals for a stimulus package in the range of $850 billion to $1 trillion. The package could include relief for Americans in the form of direct payments and tax breaks and deferred payments. Treasury Secretary Steve Mnuchin said the administration wants to mail out checks soon.
The Federal Reserve, meanwhile, continued its efforts to ensure lending markets continue to function smoothly after getting the green light from Treasury to form a commercial paper funding facility.
The stimulus measures arrived as coronavirus infections in the U.S. gather pace, with cases rising to 5,000 from 1,000 last week, and expected to increase over the coming weeks.
Drug developers worldwide are racing to find a cure, with first patient trials of a potential coronavirus vaccine reported to have begun this week.
The rally on Wall Street sparked a rebound in Treasury yields, with the 10-Year yields rising above the key 1% level, though some are warning of limited upside on worries of a U.S. recession ahead.
The rebound in the yields boosted financials, mostly banks, which benefit from a higher interest rate environment.
JPMorgan (NYSE:JPM) rose 6%, while Goldman Sachs (NYSE:GS) rose 2.5% and Bank of America (NYSE:BAC) was up more than 7%.
But the biggest gains in the market were seen in defensive corners such as utilities, real estate and consumer staples on bets that further stimulus from central banks worldwide will exacerbate the hunt for yield.
Gains in energy were kept in checked, however, after oil fell 6%, as Trump stoked further concerns about weaker travel demand after suggesting his administration was mulling further travel restrictions.