Dow rebounds more than 10%, on track for best day since 2008 as Congress nears stimulus deal

Stocks rebounded aggressively from a three-year low on Tuesday as investors hoped U.S. lawmakers were close to an agreement on a stimulus bill to rescue the economy from the damage caused by the coronavirus.

The Dow Jones Industrial Average soared 1,841 points, or more than 10%, and was on pace for its biggest one-day gain since October 2008. The S&P 500 gained 8.4% while the Nasdaq Composite advanced 7.2%. The Dow and S&P 500 closed at their lowest levels since late-2016 on Monday.

Chevron gained more than 18% to lead the Dow higher. American Express, Boeing and American also rallied more than 14%. Energy was the best-performing sector in the S&P 500, soaring 12.4%, while industrials and financials each jumped more than 10%.

House Speaker Nancy Pelosi told CNBC’s Jim Cramer there is “real optimism” in Congress over a stimulus deal being reached. “We think the bill has moved sufficiently to the side of workers,” she said.

“From a market perspective … it feels like we’re coming to the end of it,” said Michael Novogratz, CEO of Galaxy Digital, on CNBC’s “Squawk Box.” Novogratz started buying into this market on Monday, he said. “It doesn’t necessarily mean the market’s going to go up, but a lot of that crazy volatility is kind of coming out.”

Tuesday’s moves followed yet another stormy day on Monday as investors swung back to pessimism and pushed the major indexes to new multiyear lows as a procedural vote in the Senate on a bill failed for the second time in 24 hours.

The Dow dropped 582.05 points, or 3%, to a new three-year low on Monday and was on pace to clinch its worst calendar month since 1931. The S&P 500 dropped 2.9% and was more than 30% from a record close set on Feb. 19.

“The recent disorderly market action has left scars on most money managers,” said Sean Darby, global equity strategist, in a note. “Bear markets are brutal and they typically presage a recession.” However, Darby pointed out that a number of “risk indicators are peaking with only credit spreads misbehaving,” suggesting a bottom may be nearby.

Stocks hardest hit by the shutdowns resulting from the coronavirus led the gains Tuesday. Shares of Wynn and MGM Resorts were both up more than 14%. Delta Air Lines jumped more than 15%. General Motors shares, meanwhile, climbed nearly 15% after the automaker announced it will draw about $16 billion from its credit facilities to mitigate the coronavirus’ impact. 

The Cboe Volatility Index (VIX) — Wall Street’s preferred fear gauge — dropped more than 2 points, or 2.4%, to 60.12. Last week, the VIX eclipsed its financial crisis high, closing at 82.69.

Democrats have criticized the $500 billion fund that the Republican proposal sets aside for distressed businesses, calling it a bailout fund “with no strings attached.”

Tuesday’s gains also came as President Donald Trump signaled he was eager to reopen the economy, despite concerns of public health officials. “We’re opening up this incredible country. Because we have to do that. I would love to have it open by Easter,” Trump said on Tuesday. 

Markets are getting support from the Federal Reserve, which said Monday it would embark on an open-ended asset purchase program. The central bank said the program will run in the “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”

“This market has been utterly dangerous since February,” wrote Fundstrat’s Tom Lee in a note Tuesday. “But there are glimmers of hope.”

More than 400,000 cases have been confirmed worldwide, including over 50,000 in the U.S., according to Johns Hopkins University. So far, more than 600 deaths related to the coronavirus have been confirmed in the U.S. 

To be sure, some strategists on Wall Street were skeptical about Tuesday’s jump. Nikolaos Panigirtzoglou, a managing director at JPMorgan, noted there could be “considerable short covering from here,” which would temporarily lift equity prices.

—CNBC’s Eustance Huang contributed to this report.

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