U.S. stock indexes rose sharply on Monday, driven by dip-buying, bargain hunting, and on reassurances by central banks and international financial institutions that they stood ready to counter any economic impact from the coronavirus.
At 1:07 p.m. EST, the Dow Jones Industrial Average was up 2.88 percent, the S&P 500 was up 2.56 percent, and the Nasdaq Composite was up 2.55 percent.
All three Wall Street titans fell more than 10 percent last week, their biggest weekly declines since the 2008 financial crisis. They also entered correction territory, defined as down more than 10 percent from all-time highs notched earlier in February.
“On a short term basis, the market has reached oversold conditions, which means the odds for a short-term technical bounce are increased, which happened today,” said Scott Krase, CEO of CrossPoint Wealth. “This would not necessarily guarantee a final bottom, but more than likely a beginning of one with probable retests,” he told The Epoch Times in an email.
Despite the pickup in stocks, the bond market continued to signal worries among investors, who continued to favor low-risk assets. Bond prices climbed, pushing yields to record lows, from where they bounced back only slightly in intraday trading.
Wall Street’s dramatic dive last week, coupled with data showing Chinese factory activity contracting at its worst pace ever in February, led Federal Reserve Chair Jerome Powell to announce that the central bank would act as required to provide support.
The news led to a rise in bets in favor of an interest rate cut, with traders seeing a 100 percent chance of a 50 basis point rate cut at the Fed’s March meeting, according to CME Group’s FedWatch tool.
President Donald Trump took to Twitter Monday to express his view that the Fed has been “slow to act” in the face of market turbulence, urging Powell to match the “aggressive” rate cuts of other central banks.
As usual, Jay Powell and the Federal Reserve are slow to act. Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate. We don’t, putting us at a…..
— Donald J. Trump (@realDonaldTrump) March 2, 2020
In signs of a growing likelihood of a major coordinated response to the coronavirus crisis, finance ministers of G7 countries are planning a call Tuesday to discuss actions to prevent a broader economic fallout from the outbreak.
“There will be a concerted action. Yesterday I spoke with the G7 president, the U.S. Treasury Secretary Steven Mnuchin, and this week we will have a meeting by phone of the finance G7 ministers to coordinate our responses,” French Finance Minister Bruno Le Maire said on Monday, in comments to France 2 television.
“We must act so that this impact that we know will be important on growth, be as limited as possible,” he added.
The International Monetary Fund and the World Bank on Monday said in a joint statement they stood ready to help member countries cope with the fallout from the fast-spreading virus.
“The IMF and the World Bank Group stand ready to help our member countries address the human tragedy and economic challenge posed by the COVID-19 virus,” the respective heads of the two institutions stated.
“We will use our available instruments to the fullest extent possible, including emergency financing, policy advice, and technical assistance. In particular, we have rapid financing facilities that, collectively, can help countries respond to a wide range of needs. The strengthening of country health surveillance and response systems is crucial to contain the spread of this and any future outbreaks,” they said in the statement.