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Dow rises more than 100 points to end historic week of volatility

Traders work during the opening bell at the New York Stock Exchange (NYSE) on March 16, 2020 at Wall Street in New York City.

Johannes Eisele | AFP | Getty Images

Stocks rose on Friday, building on the gains from the previous session, as investors concluded a week that featured wild swings. Wall Street has been grappling with fears over the coronavirus’ economic blow, fueling historic market volatility.

The Dow Jones Industrial Average traded 130 points higher, or 0.6%. The S&P 500 climbed 0.8% while the Nasdaq Composite advanced 1.7%.

A number of factors contributed to the positive sentiment:

  • California issued a statewide order to “stay at home” for its residents, the kind of drastic measures investors have been hoping for to slow the spread of the novel coronavirus and reduce the long-term economic damage.
  • The U.S. dollar declined after central bank actions. A global rush into the greenback for safety and liquidity has sent the currency soaring, but at the same time it’s given another hit to big U.S. exporters by raising costs at this difficult time. 
  • Tech shares are bouncing as investors bet the sector can weather a recession. Shares of Microsoft were up more than 6% in premarket trading.

Friday’s moves built on the previous session’s gains. The Dow climbed nearly 1% on Thursday as tech and energy shares sparked a massive turnaround rally. Those gains were a break from the relentless selling seen in the market as investors checked their recent pessimism over a coronavirus-induced business slowdown.

The Dow entered Friday’s session down 13.4% for the week and was on pace for its biggest one-week fall since October 2008, when it slid 18.2%. The S&P 500 was down more than 11% week to date after dropping 11.5% last week. The Nasdaq was down 9.2% through Thursday’s close. 

I think there’s a technical rebound coming,” CNBC’s Jim Cramer said Friday. But “I don’t know how long it will last because I think people are very worried.”

Investors got whiplash this week amid the massive daily swings in both directions. The S&P 500 concluded on Thursday a record streak of eight trading days with a closing change of at least 4%. The Cboe Volatility Index (VIX), Wall Street’s preferred fear gauge, closed above 80 earlier in the week, topping its financial crisis peak.

“The markets are trading more on emotion than the actual data,” said Sal Bruno, chief investment officer at IndexIQ. “That’s what’s causing the volatility.”

“We’ve seen assets just trade off, really for no good reason, but just because there’s fear,” he said. “When we look back at this, we’ll see how much of this was information-based trading and how much was emotionally based trading.”

On Wednesday, the Dow closed below 20,000 for the first time since February 2017. Investors are hoping that was the bottom and that the stock market can recover as virus cases peak in the coming months and government stimulus kicks in. The 30-stock index remains 32% below its all-time high level from February, while the S&P 500 is 29% below its high.

The Fed announced this week a number of stimulus measures in addition to Congress’s efforts, but it hasn’t assuaged investors’ fears. The U.S. central bank has pushed out more than $200 billion in monetary stimulus this week alone. That number could be much higher by the end of Friday. 

“Market volatility will persist until the government – fiscal or monetary – provides a backstop to stressed corporates and small & medium businesses,” New York Life Investments’ Lauren Goodwin said Thursday. “Support of those functions is vital to ensuring the economic disruption of covid-19, though severe, is temporary,” she added.

Late Thursday, California Gov. Gavin Newson announced the statewide order. “Home isolation is not my preferred choice … but it is a necessary one …This is not a permanent state, this is a moment in time,” he said.

More than 14,000 cases have been confirmed in the U.S. along with over 200 deaths, according to data from Johns Hopkins University. Globally, more than 245,000 cases have been confirmed. 

As the number of coronavirus cases continues to rise, Bridgewater’s Ray Dalio was the latest investor to weigh in on the long-term impacts of the virus.

“What’s happening has not happened in our lifetime before … What we have is a crisis,” the Bridgewater founder said Thursday on CNBC’s “Squawk Box.” “There will also be individuals who have very big losses. … There’s a need for the government to spend more money, a lot more money.”

He said the outbreak will cost U.S. corporations up to $4 trillion, and “a lot of people are going to be broke.”

— CNBC’s Yun Li and Eustance Huang contributed reporting.

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