Stocks surge after worst day since the 1987 market crash, Dow jumps 1,000 points

Stocks rallied on Friday as Wall Street tried to recoup 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 1,000 points at the open, or 4.7%. At one point, the Dow was on pace for its biggest one-day gain since March 2009. The S&P 500 jumped 5.2% while the Nasdaq Composite surged 5%.

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.

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.

Stocks briefly cut losses Thursday after the Fed said it would conduct three repo operations as part of a stepped-up program to help keep liquidity flowing. The central bank added more than $198 billion to the financial system in a combination of overnight and longer-term offerings. But the market ended up closing at session lows.

Investors were also 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.

“There are no guarantees here, and things could get worse,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “If the number of cases continues to increase, the economic damage will go from hitting confidence to something worse. If the economy deteriorates, markets will reflect that shift.”

Meanwhile, the White House’s response to the coronavirus outbreak disappointed the market. President Donald Trump announced travel from 26 European countries will be suspended for 30 days, and added the administration would provide financial relief for workers who are ill or quarantined. 

“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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