Markets regained a large portion of their losses on Monday after suffering their worst week since the 2008 financial crisis, signaling investor confidence that central banks will step in to ease the economic pressure created by the global coronavirus outbreak.
- The Dow Jones Industrial Average added nearly 1,300 points—its biggest point gain ever—on Monday, a bump of 5.1%, while the S&P 500 rose 4.6% and the Nasdaq Composite rose 4.5%.
- Shares of tech stocks like Apple and Microsoft were also along for the ride: Apple rose 8.8% to $297 and Microsoft, fresh off major losses last week after announcing it would miss its first-quarter guidance as a result of the virus, saw a 6.35% boost to $172.29.
- Tesla was up a staggering 11.32%, bringing the cost of one share to $743.62.
- Bond traders are predicting that it’s 100% likely that the Federal Reserve will cut interest rates by 50 basis points later this month.
- The yield on a 10-Year U.S. Treasury bond fell to 1.07%, a new record low, indicating that in some part, investors are still seeking safety in government bonds rather than equities.
- The VIX index, a measure of market volatility often used as a gauge of investor fear, was still hovering at about 31.84 when markets closed on Monday; though a significant drop from last week when levels reached more than 40, it’s still more than double the pre-selloff levels.
If the coronavirus outbreak continues to worsen, it has the potential to cut global economic growth in half, according to the Organization for Economic Cooperation. A more serious outbreak could also push Japan, the eurozone and other major economies into recession. The OECD said that while changes to monetary policy (like cutting interest rates) could help restore confidence in the economy, governments still need to act ‘swiftly and forcefully’ to contain the virus.
Global markets faced their worst week since the financial crisis last week as fear over the potential impact of the coronavirus outbreak rattled investors. The Dow Jones Industrial Average lost 14%, the S&P lost 13% and U.S. Treasury bond yields plummeted to new record lows as traders abandoned risky assets for safer ones. 96 cases of the virus have now been confirmed in the United States, and there have now been six confirmed coronavirus deaths in the U.S. Across the globe, 90,000 people have been infected and over 3,000 people have died from the disease.