Stocks open higher on Wall Street following a 7-day rout
The Dow Jones industrial average soared nearly 1,300 points, or 5%, on Monday as stocks roared back from a seven-day rout on hopes that central banks will take action to shield the global economy from the effects of the coronavirus outbreak.
Bond prices fell, pushing yields up after the yields touched another record low earlier in the day. The yield on the 10-year Treasury note rose to 1.15% from Friday’s 1.12%.The virus outbreak that began in central China has been shutting down industrial centers, emptying shops and severely crimping travel all over the world. More companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales.
Bill Nelson, chief economist at the Bank Policy Institute and a former Fed economist, said the Fed and other major central banks — possibly including China’s — could announce coordinated rate cuts by Wednesday morning. The cut would at least be half a percentage point and perhaps even three-quarters of a point, he said. “The only way to get a positive market reaction is to deliver more than expected.
One encouraging sign to traders is that the finance ministers and central bank leaders of the Group of 7 major industrial countries will hold a conference call Tuesday to discuss an economic response to the viral outbreak. U.S. Treasury Secretary Steven T. Mnuchin and Federal Reserve Chairman A. Jerome Powell will lead the call. The group includes Japan, Germany, Britain and France, among others. The G-7 often issues statements pledging cooperation amid global economic turbulence.
Separately, economists at Goldman Sachs slashed their forecasts for U.S. economic growth to 0.9% in the current quarter and to zero for the April-through-June quarter.For investors, the great amount of uncertainty over how consumer behavior and spending will be affected has been unsettling. The last time the market had a drop of that size was in late 2018, when the U.S.-China trade war was escalating and investors were worried about rising interest rates. With Monday’s surge, the S&P 500 is now 8.7% below the record high it reached Feb. 19.
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