Stocks rebound after stimulus bill, oil prices crawl out of negative territory
US stocks and oil prices rebounded Wednesday as the US government and several states unleashed fresh initiatives to combat the coronavirus fallout, including nearly $500 billion in federal stimulus.
The Dow Jones industrial average climbed as much as 481.32 points, or roughly 2.1 percent, to 23,500.20 after shedding more than 1,200 points in the prior two days. The S&P 500 and Nasdaq composite also jumped as much as 2.3 and 2.7 percent, respectively.
The bounce came a day after the US Senate passed a $484 billion stimulus bill that includes $320 billion new loan funding for small businesses grappling with the pandemic.
Several southern states have also announced plans to reopen their economies as the outbreak starts to wane in the US, adding to optimism that the end of a nationwide shutdown may end before too long.
“Maybe what we’re going to do here is give a restart a try — not all the way or anything, but certainly in some way,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “We’re getting close to where the free-fall in economic data might come to an end for a period.”
But investors likely expected Congress to deliver more stimulus amid concerns that the small-business aid in last month’s $2.2 trillion bill was not enough, said Lamar Villere, portfolio manager of the Villere Balanced Fund.
“A lot of people just couldn’t move quickly enough or had the wrong bank or wrong banking relationship” to get a loan, Villere said. “There was not going to be a lot of political cover if they didn’t continue the program.”
The Wall Street rally accompanied a jump in oil prices, which dropped below zero for the first time ever earlier this week as the pandemic destroys demand for fuel and storage capacity dwindles. West Texas Intermediate crude futures traded as high as $16.18 a barrel, a nearly 40 percent jump from Tuesday’s close of $11.57.
The surge came after President Trump said he authorized the Navy to “destroy” Iranian gunboats that harass American vessels following reports of US ships being hounded by Iran. Oil prices similarly spiked in January after a US airstrike killed Iranian general Qassem Soleimani.
But experts expect oil to remain under pressure because neither the coronavirus nor the supply issues are going away any time soon.
“Oil is one market that governments and central banks have no answer for as an uncommon cross to bear of a sudden drop in demand and continuing supply glut is wreaking havoc across the complex,” said Stephen Innes, chief global market strategist at AxiCorp.