US Market rebounds on central bank stimulus hopes

The US equity market finished session higher on Monday, 02 March 2020, as stocks bounced back sharply from the previous week's selloff, on optimism that the Federal Reserve and other central banks would soon intervene and limit the coronavirus's economic impact on the global economy. At closing bell, the Dow Jones Industrial Average surged 1,293.96 points, or 5.1%, to 26,703.32. The S&P 500 rebounded 136.01 points, or 4.6%, to 3,090.23., while the Nasdaq Composite advanced 384.80 points, or 4.5%, to 8,952.16. Last week, the Dow fell 12.4%, the S&P 500 lost 11.5% and the Nasdaq shed 10.5%, representing their worst weekly skids since 2008.

The rebound in US market came as investors acted on a belief that the Fed and other central banks will take some action, including multiple rate cuts, after last week's sell-off fueled anxiety that coronavirus could trigger a recession, even when it wasn't clear that their traditional methods for staving off an economic downturn would be a match for the flu-like virus. The Bank of Japan said it would provide ample liquidity to keep financial markets stable and the Bank of England also pledged to do what's necessary for the British economy's stability. The Federal Reserve next meets on March 18 and market expectations for interest rate cut.

 

The magnitude of the COVID-19 outbreak and its effect on the economy and supply chains remain the biggest questions for investors. The global death toll from COVID-19 has passed 3,000, and South Korea said Monday it had confirmed 599 new cases, far higher than the daily tally reported in China. Italy now has more than 1,600 confirmed cases, while Iran surpassed 1,500, with 66 deaths. Meanwhile, health officials in Washington state on Monday said there have been four more deaths from the outbreak, bringing the total to six.

The Paris-based Organization for Economic Cooperation and Development on Monday forecast that the global economy would grow by 2.4% in its best case scenario, compared with 2.9% expansion projected before the viral outbreak. The OECD urged governments to act swiftly and forcefully to boost the world economy. Finance ministers from the Group of Seven economies were scheduled to hold a call Tuesday to discuss potential responses to the virus, according to reports.

Shares of Mobile Mini Inc. rose 5.2%, after the portable storage solutions company agreed to be acquired by WillScot Corp. in a deal that values Mobile Mini at about $1.9 billion. WillScott Corp. shares fell 2.3%.

Tesla Inc. shares rose 11.3%, snapping a five-day losing streak that saw them tumble 25.9% on worries over the impact of the coronavirus outbreak.

ECONOMIC NEWS: The Institute for Supply Management said its manufacturing index dipped to 50.1% last month from 50.9%. Producers reported supply bottlenecks linked to the coronavirus, which has hampered their ability to get parts. Any reading below 50% indicates deteriorating conditions.

In Commodity news: Commodities broadly rebounded from last week's selloffs. Gold futures settled up 1.8% at $1,592.30 an ounce after suffering a nearly 5% decline on Friday, while oil prices with West Texas Intermediate crude for April delivery ended 4.4% higher at $46.75 per barrel.

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