Dow surges 4.9% in another wild day on hopes for virus aid

Stocks on Tuesday recouped most of their historic losses from the prior day as hopes rose, faded and then bloomed again on Wall Street that the U.S. government will try to cushion the economic pain from the coronavirus.

The S&P 500 surged as much as 3.7% in the morning, only to see those gains evaporate by midday. The index then bounced up and down before turning decisively higher after President Donald Trump pitched his ideas for a break on payroll taxes and other economic relief to Senate Republicans.

By the end of trading, the S&P 500 was up 4.9% and had erased three-fifths of Monday’s loss.

The moves reflected the mood of a market just as preoccupied with the virus as the rest of the world. Since U.S. stocks set their record high just a few weeks ago, traders have crossed over from dismissing the economic pain created by COVID-19 — thinking it’s similar to the flu and could stay mostly contained in China — to being in thrall to it — worrying that it may cause a worldwide recession.

Severe price swings are likely to continue as long as the number of infections accelerates, market watchers say. In the meantime, investors want to see a big, coordinated response from governments and central banks to shore up the virus-weakened economy.

Monday’s 7.6% plunge for U.S. stocks was the sharpest since 2008, when global authorities banded together to rescue the economy from the financial crisis.

Investors saw glimmers of such a coordinated response, which led to Tuesday’s optimism.

At a White House press briefing Monday night, Trump said his administration would be asking Congress to pass payroll tax relief and other quick measures aimed at easing the impact of the coronavirus on workers.

In Japan, a task force set up by the prime minister approved a $4.1 billion package Tuesday with support for small to medium-sized businesses.

“I would expect the authorities to pull out all the stops to reduce uncertainty," said Alec Young, managing director of global markets research at FTSE Russell. 

The 10-year Treasury yield rose to 0.79% from 0.49% late Monday. A week ago, it had never been below 1%.

The S&P 500 rose 135.67 points, or 4.9%, to 2,882.23. The Dow Jones Industrial Average rose 1,167.14 points, or 4.9%, to 25,018.16, and the Nasdaq composite jumped 393.58, or 5%, to 8,344.25.

The recovery is pulling the stock market a bit further from the edge of a bear market, signified by a drop of 20% from a record. The S&P 500 is down 14.9% from its high.