Topline: The stock market rallied somewhat on Friday—a day after its worst drop since the 1987 Black Monday crash—on hopes that global policy makers will take quick action and provide financial stimulus to address the economic fallout from the coronavirus pandemic.
- The Dow Jones Industrial Average is up 4.7%, over 1,000 points, by midday on Friday, while the S&P 500 rose 4.5% and the Nasdaq Composite rose by around 4.2%.
- Overnight stock futures had indicated that the market would rebound, with S&P 500 futures “limit up” levels of more than 5% in pre-market trading.
- The Dow lost a staggering 10%, or over 2,300 points, in Thursday’s widespread market sell-off, while the S&P 500 and Nasdaq both lost around 9.5%.
- Friday’s rally comes amid renewed optimism that the market will benefit from further liquidity injections from the Federal Reserve, not to mention pending financial stimulus measures from the Trump administration to limit the economic impact from the coronavirus outbreak as the number of confirmed cases continues to rise across the U.S.
- Wall Street cheered news that the Trump administration is taking additional steps to speed up access to coronavirus testing, not to mention the Federal Reserve’s $1.5 trillion injection of liquidity into markets to address the “highly unusual” disruptions caused by the coronavirus pandemic.
- Treasury Secretary Steven Mnuchin told CNBC on Friday that Congress and the White House are close to finalizing an economic stimulus package, while also saying that the coronavirus sell-off will be a great opportunity for long-term investors, just like in the 1987 Black Monday market crash.
Crucial quotes: “Amid all the gloom, a key difference from 2008-09 is that the financial system – the lifeblood of the economy – is still relatively healthy,” says Lewis Alexander, chief U.S. economist at Nomura. If the West can “replicate Asia’s success in containing the virus in one quarter,” the global economy could “rebound strongly” in the second half of 2020 on “pent-up demand and policy stimulus gaining traction,” he predicts.
Big numbers: Some of the market’s biggest stocks—tech giants like Apple, Microsoft, Amazon, Google and Facebook—lost a total of $420 billion during Thursday’s market sell-off. Warren Buffett’s Berkshire Hathaway and Jack Ma’s Alibaba both lost around $40 billion in market value.
Key background: “Stocks are (tentatively and only mildly) rebounding in the U.S. and Europe after the absolute bloodbath session on Thursday,” according to Vital Knowledge founder Adam Crisafulli. “This doesn’t feel like anything more than an oversold bounce, although there were a bunch of response measures unveiled in the last 12 hours (along with suggestive remarks about more to come) that are helping to stabilize sentiment.”
What to watch for: “These days any discussion of levels in the financial markets warrants the qualifier 'for now,’ according to a note on Friday from Bespoke Investment Group. “We're not out of the woods yet, and the headlines are going to get worse, but at some point the market will be able to look through that.”