United States stock markets roared back into positive territory on Tuesday, on growing hopes that Republican and Democratic legislators on Capitol Hill are close to passing a coronavirus economic aid package approaching nearly $2 trillion.
The Dow Jones Industrial Average rebounded to post its best one-day point gain ever and its biggest percentage gain since 1933, closing up 2,112.98 points or 11.37 percent to 20,704.91.
The broader S&P 500 Index – a proxy for US retirement and college savings plans – finished the session up 9.38 percent, while the tech-heavy Nasdaq Composite Index closed up 7.81 percent.
The swift spread of COVID-19 across the US combined with the anticipation of significant stimulus measures from Washington to counter the economic fallout of the pandemic have whipsawed US stock indexes in recent weeks.
Tuesday’s share gains were broad-based. Energy stocks led the charge higher, with the S&P 500 energy sector bouncing 16.9 percent.
On Monday, the massive government aid package to help workers, firms and industries weather the coronavirus crisis stalled on Capitol Hill, with Republicans accusing Democrats of foot-dragging unnecessarily and imperilling the economy, and Democrats accusing Republicans of putting the interests of Wall Street and big corporations above the wellbeing of workers and Americans.
While the politicians talked the talk, the US Federal Reserve once again walked the walk – stepping up in a big way on Monday with a slew of history-making measures to keep credit flowing to businesses and households, as well state and local governments.
For the first time ever, the Fed is backing purchases of corporate bonds and backstopping direct loans to companies. It signalled it will make unlimited purchases of US Treasury bonds and mortgage-backed securities, and also promised a lifeline to small and medium-sized businesses, saying it will “announce soon” the establishment of a Main Street Business Lending Program.
The credit market has come under tremendous strain as businesses in the US and abroad hoard US dollars – the global reserve currency – like households are hoarding toilet paper.
General Motors said on Tuesday that it will draw about $16bn from its credit lines in a bid to beef up its liquidity war chest to weather the disruption from coronavirus. The number one US automaker also suspended its 2020 outlook and said it is evaluating its quarterly dividend but has not yet decided to suspend it.
“We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity,” said CEO Mary Barra.
Last week, Ford Motor Co also said it was suspending its 2020 forecast and said it is drawing down $15.4bn from two credit facilities.
Shares of GM gained 19 percent, while Ford shares soared 23 percent.
Also on Tuesday, Boeing CEO Dave Calhoun said the aerospace giants expects a “midyear” return to service for the grounded 737 MAX and said the company needs to know credit markets remain open to the aerospace manufacturing sector.
“We’re very close to the finish line,” Calhoun told business news network CNBC of the plane that has been grounded since two fatal crashes happened within five months in 2018. Boeing is seeking a $60bn US government bailout for itself and the aerospace industry. “There are a lot of options for us in the private markets et cetera, but the credit markets have to be open,” Calhoun said, noting that Boeing “has $15bn in the bank”.
Shares of Boeing gained more than 19 percent on the day.