Wall Street Bounces After Monday’s Selloff as Fed Boosts Liquidity

March 18, 2020 Updated: March 18, 2020

NEW YORK—The S&P 500 rose 6 percent on March 17, a day after its steepest decline since the 1987 crash, as the Federal Reserve took further steps to boost liquidity and stem damage from the coronavirus outbreak that has gripped the global economy.

The central bank relaunched a financial crisis-era purchase of short-term corporate debt in the hope that companies are able to continue paying workers and buying supplies through the pandemic.

The March 17 move to buy back commercial paper followed several emergency measures taken by the U.S. central bank on March 15, including slashing interest rates to near zero.

But with the day’s bounce, the market has retraced only part of its recent losses. The S&P 500, which fell 12 percent on March 16, is still down roughly 25 percent from its Feb. 19 record closing high, and many market-watchers see more volatility ahead.

The Dow Jones Industrial Average rose 1,048.86 points, or 5.2 percent, to 21,237.38, the S&P 500 gained 143.06 points, or 6.00 percent, to 2,529.19 and the Nasdaq Composite added 430.19 points, or 6.23 percent, to 7,334.78.

Investors “like that the Fed is willing to step in here and willing to step in big. … That’s an important message that they’re sending to market participants,” said Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute in Winston-Salem, North Carolina.

Potential Shortened Trading Days

U.S. Treasury Secretary Steven Mnuchin suggested at a news conference on March 17 that shortened trading hours may be needed at some point. He didn’t explain the conditions that could prompt the move.

In response, CME Group Chairman and Chief Executive Terry Duffy issued a statement objecting to any move to shorten the trading session due to high volatility. CME Group operates the Chicago Mercantile Exchange, the world’s largest derivatives bourse.

Intercontinental Exchange Inc., which operates the New York Stock Exchange, said in a statement that its platforms were operating normally and that it was prepared to switch to all-electronic trading if necessary.

“Shorter hours make no sense,” CME’s Duffy wrote. “Markets are global, so shortening U.S. hours would not decrease volatility. Rather, it could actually increase as investors turn to other venues outside the U.S. when developments occur.”

“We absolutely believe in keeping the markets open,” Mnuchin told reporters.

“We may get to a point where we shorten the hours if that’s something they need to do, but Americans should know that we are going to do everything that they have access to their money at their banks, to the money in their 401(k)s, and to the money in stocks,” he added.

Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas, said a limited overnight trading window for the Chicago Mercantile Exchange’s S&P futures, known as E-minis, might help reduce volatility. Late-night trading in E-minis, which is open nearly around the clock, is often thin and volatile and can have a big influence on investors looking for a reference point ahead of Wall Street’s opening bell, he said.

By Caroline Valetkevitch