Dow rebounds from worst day in three decades, but is off highs of session

Stocks rallied on Friday as Wall Street recovered some of the sharp losses suffered in the previous session — the worst since the “Black Monday” market crash in 1987.

The Dow Jones Industrial Average soared 799 points, or 3.6%. At one point, the Dow was up more than 1,300 points and on pace for its biggest one-day gain since March 2009. The S&P 500 jumped 4.1% while the Nasdaq Composite surged 3.8%.

Before the open, S&P 500 futures hit their “limit up” levels, jumping more than 5%.  These limit levels act as a ceiling for buying until regular trading begins and are meant to insure orderly trading.

Apple shares jumped 6.8% after an analyst at Wells Fargo upgraded the tech giant to overweight from equal weight, citing a “compelling risk/reward” outlook. 

Airline stocks rallied, with Delta and United gaining 14% and 9.5%, respectively. American traded higher by 9.2% while JetBlue gained 3.6%.

Stocks got a boost after House Speaker Nancy Pelosi said U.S. lawmakers and the White House were close to a deal on economic relief amid the coronavirus outbreak. “We’ve resolved most of our differences,” Pelosi told reporters Thursday evening, noting it’s about “testing, testing, testing.”

Treasury Secretary Steven Mnuchin also told CNBC’s “Squawk on the Street” the White House and Congress were nearing a deal. “The president is absolutely committed that this will be an entire government effort, that we will be working with the House and Senate,” Mnuchin said.

In Germany, the government pledged to spend all the money needed to support the economy amid the outbreak. “We are using all necessary measures to protect workers and companies,” German Finance Minister Olaf Scholz said in a news conference.

Central bank action from around the world also boosted equities. The Bank of Japan injected 500 billion yen as a response to the global market sell-off. Norway’s central bank cut rates by 50 basis points and the Bank of Korea was reportedly in talks over a possible emergency rate cut. 

Friday’s action followed the official end of the longest bull-market run in history. The S&P 500 plummeted 9.5% Thursday in its worst day in more than three decades, joining the Dow in a bear market, or more than 20% from its recent peak. The Dow also suffered its worst point drop ever and the biggest percentage decline since 1987.

“There has been indiscriminate selling, which is good thing,” said Quincy Krosby, chief market strategist at Prudential Financial. “That’s the kind of panic you wait for.”

“The one concern I’ve had is, it almost seems as if the market has a gravitational force to that Dec. 24, 2018 low,” Krosby said. “It feels as though the market wants to go back there.”

The market’s historic drop on Thursday indicated that investors believe the government’s fiscal plans and the Federal Reserve’s ramped-up funding actions wouldn’t be sufficient to offset the economic impact from the coronavirus.

“I would advocate for pushing money into the hands of companies right now, and into the hands of individuals … and individual consumers because that is really the only thing … that is going to help at this point,” David Riedel, president and founder of Riedel Research Group, told CNBC’s “Squawk Box Asia” on Friday morning Singapore time.

“When they’re ready to spend, then that V (shaped recovery) … can take hold and things can start to recover quickly,” he said.

Investors were bombarded with a slew of negative headlines about the fast-spreading coronavirus. The NCAA has canceled its March Madness basketball tournaments, a day after the National Basketball Association suspended the remainder of its season indefinitely. New York Mayor Bill de Blasio declared a state of emergency, while new restrictions for large events and businesses were imposed.

“These are no doubt jarring times — investors should take this time to review their portfolio and make sure they’re comfortable with their level of risk,” said Mike Loewengart, managing director of investment strategy at E-Trade.

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