U.S. Stocks Close Sharply Higher Following Yesterday’s Sell-Off

Stocks saw considerable volatility early in the session on Tuesday but moved sharply higher over the course of the trading day. With the rally on the day, the major averages partly offset the sell-off seen in the previous session.

The major averages held on to strong gains going into the close. The Dow soared 1,048.86 points or 5.2 percent to 21,237.38, the Nasdaq skyrocketed 430.19 points or 6.2 percent to 7,334.78 and the S&P 500 spiked 143.06 points or 6 percent to 2,529.19.

The rally on Wall Street was partly due to bargain hunting, with traders picking up stocks at reduced levels following the sharp decline seen on Monday.

The Dow saw its biggest percentage drop since the stock market crash of 1987, as traders shrugged off the Federal Reserve’s decision to slash interest rates in an effort to contain the economic fallout from the coronavirus pandemic.

Positive sentiment was also generated in reaction to President Donald Trump’s pledge to support industries that have been hit particularly hard by the outbreak, such as airlines.

“The United States will be powerfully supporting those industries, like Airlines and others, that are particularly affected by the Chinese Virus. We will be stronger than ever before!” Trump said in a post on Twitter.

Treasury Secretary Steven Mnuchin also said during a press briefing earlier today that the administration is hoping to get cash into Americans’ pockets “immediately.”

Subsequent reports indicated the Trump administration is considering a fiscal stimulus package that could exceed $1 trillion.

In U.S. economic news, the Commerce Department released a report showing an unexpected decrease in retail sales in the month of February.

The Commerce Department said retail sales fell by 0.5 percent in February after climbing by an upwardly revised 0.6 percent in January.

The pullback came as a surprise to economists, who had expected retail sales to edge up by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

Excluding a 0.9 percent decrease in auto sales, retail sales still slid by 0.4 percent in February after rising by an upwardly revised 0.6 percent in January. Ex-auto sales had been expected to tick up by 0.2 percent.

Meanwhile, a separate report from the Federal Reserve showed industrial production rebounded by more than anticipated in the month of February.

The Fed said industrial production climbed by 0.6 percent in February after falling by a downwardly revised 0.5 percent in January.

Economists had expected industrial production to increase by 0.4 percent compared to the 0.3 percent drop originally reported for the previous month.

The National Association of Home Builders also released a report showing homebuilder confidence has deteriorated by slightly more than anticipated in the month of March.

The report said the NAHB/Wells Fargo Housing Market Index fell to 72 in March after edging down to 74 in February. Economists had expected the index to dip to 73.

NAHB Chief Economist Robert Dietz noted more than half of the builder responses were collected prior to March 4, so the recent stock market declines and the rising economic impact of the coronavirus will be reflected more in next month’s report.

Sector News

Utilities stocks moved sharply higher over the course of the trading session, resulting in a 13.5 percent spike by the Dow Jones Utility Average. The average bounced off its lowest closing level in well over a year.

Substantial strength was also visible among gold stocks, as reflected by the 12.9 percent jump by the NYSE Arca Gold Bugs Index. With the gain, the index continued to rebound after hitting its lowest intraday level in over a year in early trading on Monday.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for April delivery soaring $39.30 to $1,525.80 an ounce.

Semiconductor stocks also saw considerable strength on the day, resulting in a 9.8 percent surge by the Philadelphia Semiconductor Index.

Software, retail, transportation and pharmaceutical stocks also showed significant moves to the upside, while oil stocks bucked the uptrend amid another steep drop by the price of crude oil.

Other markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index fell by 0.3 percent.

Meanwhile, European stocks saw substantial volatility before closing sharply higher. While the German DAX Index surged up by 2.3 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index both soared by 2.8 percent.

In the bond market, treasuries pulled back sharply following the significant rebound seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, spiked by 26.9 basis points to 0.997 percent.

Looking Ahead

A report on new residential construction is scheduled to be released on Wednesday but is likely to be overshadowed by the latest developments on the coronavirus front.

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