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Business

Dow plunges 900 points after historic rally as coronavirus spreads

By
Noah Manskar
Published March 27, 2020
Updated March 27, 2020, 9:31 p.m. ET

US stocks tumbled despite President Trump signing a $2.2 trillion coronavirus rescue package, as the deadly bug’s rampant spread across the US rattled Wall Street.

The Dow Jones industrial average sank 915.39 points, or 21,636.78, spoiling a historic three-day rally that had ended an 11-day bear market, despite Congress and the White House on Friday finally delivering the biggest economic rescue in US history.

The S&P 500 sank as much as 3.4 percent while the Nasdaq dropped 3.8 percent.

The unprecedented relief program will dole out checks and beefed-up employment benefits to millions of Americans, even as it props up cash-strapped industries from airlines to hotels.

Nevertheless, investors remain distracted by growing statistics on the pandemic’s growth. The US eclipsed China this week with its total number of coronavirus cases, which is now more than 85,000. Nearly 1,300 were dead in the US as of Friday.

“This week’s historic stock market rebound seems to be more of a bear market rally than a confirmation that the bottom is in place,” OANDA senior market analyst Ed Moya wrote in a commentary. “Coronavirus worries and messy fundamentals will likely see skepticism remain on everyone’s mind.”

The Friday selloff came after the Dow soared almost 4,000 points in the prior three trading days — its biggest three-day jump since 1931.

The three-day surge, spurred by anticipation of the stimulus package to address the virus, had put an end to the blue-chip index’s 11-day bear market, its shortest ever. Nevertheless, stocks continue to languish, with all three major indexes more than 20 percent off their February highs.

The House of Representatives voted Friday to approve the massive spending plan. But the bill’s likely passage was baked into the midweek rally as investors bet that Congress would match the Federal Reserve’s aggressive efforts to blunt the virus’s economic impact, experts said.

While the government has indicated it will do whatever it takes to stanch the bleeding, much remains uncertain about the path of the virus and the economic damage it will cause — which will continue to weigh on the market in the coming weeks, said Quincy Krosby, chief market strategist at Prudential Financial.

“The market has discounted bad news. The question is how bad it’s going to be,” Krosby said. “That’s the difficulty here, is that we are at the mercy of a virus that has its own trajectory and doesn’t care when we’re going back to work or how long we will be restricted.”

Wall Street is waiting to see how long the virus will keep swaths of the US shut down as investors await corporate earnings reports that will show how hard companies have been hit, according to Lamar Villere, portfolio manager of the Villere Balanced Fund.

“Until we have some criteria, some framework to make reasonable estimates of the historical and future impact, it’s hard for me to get comfortable with the credibility of these rallies,” Villere said.