US stocks claw back 1,100 points, halving Monday’s historic loss

United States stock markets on Tuesday started crawling out of the massive hole dug by the previous session’s historic selloff, as investors focused on the prospects of a possible breakthrough in the Saudi Arabia-initiated oil price war, and possible stimulus measures from Washington for the US economy

A volatile session saw the Dow Jones Industrial Average soar at the opening bell, turn negative midday, then make an about-face for a bumpy ride north to close up more than 1,100 points or 4.9 percent – enough to halve Monday’s 2,000-point historic loss.

The broader S&P 500 – a barometer for the health of US retirement accounts and college savings plans – closed up 4.9 percent, while the tech-heavy Nasdaq Composite Index gained 4.9 percent.  

As investors waded back into stocks, they pulled back from the safe haven of US Treasuries, lifting the yield on the 10-year note above 0.5 percent.

“Markets tend to continue to melt down when facing a crisis until the adults in the room stand up and offer suggestions on what can be done to reverse, or at least cushion, the blow to the economy,” Steven Ricchiuto, US chief economist at Mizuho Securities USA, wrote in a note to clients.

“What investors need to see now are additional road signs they can follow to get out of the forest of worry they are trapped in. Until then, the path of least resistance is lower equity prices and lower Treasury yields,” he added. 

Stock market investors appeared to take heart after US President Donald Trump on Monday said the White House is exploring “very substantial relief” in the form of tax incentives to offset the negative impacts of coronavirus.

The president met with Republican members of Congress on Tuesday to discuss measures. Among the ideas floated was reduction in the payroll tax to zero or indefinitely, the Reuters News Agency reported, citing a source. 

Slashing the payroll tax would effectively take less money out of workers’ paycheques, helping them absorb coronavirus work disruptions and giving them more money to spend and grow the economy. It also helps businesses. 

Monday’s epic stock rout was triggered after Saudi Arabia launched a war over oil prices in retaliation for Russia refusing to back deep output cuts. The resulting 30 percent crash in oil prices at one point on Monday unleashed panic into markets already unsettled by the widening coronavirus outbreak.

On Tuesday, though, oil prices began to recover. Global benchmark Brent crude for May delivery moved back above $37 a barrel after Russian Minister of Energy Alexander Novak said Moscow is ready to open discussions again with the Saudi-led Organization of the Petroleum Exporting Countries.