U.S. stocks were slightly higher Tuesday afternoon after a volatile session that initially saw a strong rebound from the worst one day sell-off since the 2008 financial crisis, helped by President Trump’s proposal for a payroll tax cut, before renewed concerns about the economic impact of the COVID-19 epidemic sent stocks lower, then back to positive territory by midday.
A Tuesday rebound would not be unusual — Bespoke Investment Group strategists found that in the 10 previous times since 1952 that the S&P 500 fell 5% or more on a Monday, the index has gained the following day, by an average of 4.2%.
What are the major indexes doing?
The Dow Jones Industrial Average DJIA, +2.68% was up 464 points, or 2%, at about 24,315, while the S&P 500 SPX, +2.81% rose 55 points or 2% to trade near 2,802. The Nasdaq Composite Index COMP, +2.88% was up 165 points, or 2.1%, at 8,115.
The Dow on Monday plunged 2,013.76 points, or 7.8%, to 23,851.02, while the S&P 500 fell 225.81 points, or 7.6%, to end at 2,746.56, near its session low. The Nasdaq Composite Index plunged 624.94 points, or 7.3%, to finish at 7,950.68. All three benchmarks suffered their biggest one-day percentage declines since 2008.
What’s driving the market?
Stock-index futures found support early Tuesday after President Donald Trump said in a White House news conference that he would seek payroll tax relief and other measures to help businesses deal with the coronavirus outbreak. Trump said he would announce more details Tuesday, and discuss “a possible payroll tax cut or relief, substantial relief, very substantial relief, that’s big, that’s a big number,” the Associated Press reported.
However, administration officials said the White House wasn’t ready to roll out specific economic proposals, CNBC reported early Tuesday, citing administration officials. Later, Trump tweeted that House Speaker Nancy Pelosi had said a stimulus package might not be ready this week.
By mid-afternoon Tuesday, there was no update on the promised announcement. In a spontaneous gaggle with reporters on Capitol Hill, Trump said he saw no reason to personally get tested for the virus.
Monday’s stock plunge was the result of fears that government attempts to contain the epidemic may also shut down economic activity globally. At the same time, the biggest one day fall in crude oil prices since the 1991 Gulf War, after Saudi Arabia and Russia began a price war last Friday, also raised fears of a credit crisis in the energy industry.
See:Why an ‘oil shock’ sent the Dow down 2,000 points and upended global financial markets
Also read:Why U.S. shale oil producers are the real target in the Saudi-Russia price war
“My personal view is that there’s still some more downside to come, largely due to the fact that we don’t have good data on the extent of the virus in the US,” said Donald Calcagni, chief investment officer with Mercer Advisors, in an interview.
Equities markets may perk up on discussion of tax cuts, Calcagni said, “but I don’t think that’s a long-term solution. Eventually we’ll have to take it back. I think what the market really needs to see is better leadership out of the White House in terms of dealing with the virus.”
Markets are now pricing in an easing of monetary policy from the European Central Bank at its Thursday meeting this week and from Federal Reserve at next week’s policy meeting.
Meanwhile, investors are keeping close tabs on the spread of the coronavirus epidemic. Italy moved into full lockdown, with the government barring persons from leaving cities in which they reside without special permission and implementing range of other measures.
In corporate news, airlines, including American Airlines Group Inc. AAL, +16.88% , Delta Air Lines Inc. DAL, +4.41% and Southwest Airlines Co. LUV, +4.47% announced capacity reductions and other measures in response to the coronavirus outbreak.
Airline shares took off: American Airlines shares were about 18.2% higher, while Delta shares jumped 4.5%, and Southwest shares were up more than 4%.
See: Airlines move to cut capacity and rein in costs as coronavirus effect intensifies
What are other markets doing?
After plummeting 25% Monday, their worst day since the 1991 Gulf War, crude oil prices were on the rise. West Texas Intermediate crude for April delivery CLJ20, +11.59% on the New York Mercantile Exchange rose 8.5% to $33.77 a barrel, while May Brent crude BRNK20, +10.04%, the global benchmark, gained 7.7%, to $37.04 a barrel.
Treasury prices also retreated lifting yields, as haven flows abated. Yields which move in the opposite direction of price, dropped sharply on Monday, sending the 10-year note TMUBMUSD10Y, 0.743% and 30-year bond TMUBMUSD30Y, 1.225% rates to all-time lows. The 10-year yield popped 14 basis points to 0.70%, while the 30-year yield was 16 basis points higher to 1.17%.
Gold futures GCJ20, -1.42% slid 1.4% to $1,653.70 an ounce.
The dollar DXY, +1.57% was 1.6% higher against a basket of currency trading partners.
In Asia overnight, the Nikkei NIK, +0.85% rose 0.85%, the China CSI 300 000300, +2.14% popped 2.1%, and the Hang Seng HSI, +1.40% was up 1.4%.
In Europe, the STOXX 600 SXXP, -1.13% closed more than 1.1% lower. Italy’s FTSE MIK Index I945, -3.27% tumbled nearly 3%.
Which stocks are in focus?
Tesla Inc. TSLA, +5.60% shares bounced nearly 4% after notching a series of lows. The stock is still more than 50% higher in the year to date.
Shares of Occidental Petroleum Corp. OXY, +11.11% roared 13% higher after the energy company said it would slash its dividend.
Stitch Fix Inc. SFIX, -27.72% shares tumbled by nearly one-third after reporting results that missed analyst expectations.
Shares of Thor Industries Inc. THO, +8.97% jumped 7.3% even after a hefty stock price target cut, to $75 from $95, by KeyBanc Capital analysts. In Tuesday trading, it was at about $54.
A handful of cruise operators saw shares gain after President Trump pledged aid, including Carnival Corporation CCL, +7.84%, which rose 8.8%, and Norwegian Cruise Line Holdings NCLH, +0.05% , which was up 1% midday.
See:Here’s how investors say policymakers could help businesses survive a coronavirus cash crunch
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