By Stan Choe and Damian J. Troise
Stocks jumped Wednesday morning and clawed back much of their sharp losses from the day before as Wall Street's wild, virus-fueled swings extend into a third week.
Health care stocks led the market's spurt after a strong performance by Joe Biden in state primaries on Tuesday moved him to top-tier contender status for the Democratic presidential nomination. Many investors believe he is more friendly to businesses than rival Bernie Sanders, whose proposals for health care and the economy could hurt profits at insurers and other companies.
Investors are also waiting to see if other central banks will follow up on the Federal Reserve's surprise move Tuesday to slash interest rates by half a percentage point in hopes of protecting the economy from the economic fallout of a fast-spreading virus.
The S&P 500 was up 2.1 percent, as of 10:25 a.m. Eastern time. It recovered roughly two-thirds of its loss from the day before when worries flared that rate cuts would not be able to halt the spread of the virus. The Dow Jones Industrial Average climbed 635 points, or 2.5 percent, to 26,552, and the Nasdaq rose 2 percent.
Some measures of fear in the market eased, but Treasury yields fell again toward more record lows in a sign that the bond market remains concerned about the economic pain possible from the fast-spreading virus. Companies around the world are already saying the virus is sapping away earnings due to supply chain disruptions and weaker sales, with General Electric becoming the latest to warn its investors.
Even though many investors say they know lower interest rates will not solve the health crisis, they want to see central banks and other authorities do what they can to lessen the damage. The S&P 500 sank 2.8 percent on Tuesday after a brief relief rally triggered by the Fed's rate cut fizzled, as doubts rose about how effective lower rates will be in this health crisis.
"Monetary policy can only take us so far, but at least it's a step," said Jack Ablin, chief investment officer at Cresset. "Investors will take comfort in coordinated central bank action. I take comfort in knowing this isn't the plague, we'll eventually get through this."
An indicator of fear in the market, which measures how much traders are paying to protect themselves from future swings for the S&P 500, eased by 9 percent in morning trading. The price of gold, which tends to rise when investors are feeling fearful, also dipped 30 cents to $1,644.10 per ounce. Crude oil, which moves in part on expectations for economic strength, rose more than 1 percent.
But the bond market, which was among the earliest to flash red flags about the economic pain from the virus, was still showing caution. The yield on the 10-year Treasury fell to 0.97 percent from 1.01 percent late Tuesday, a day after sinking 0.08 percentage points and dipping below 1 percent for the first time in history. Yields fall when investors are worried about weaker economic growth and inflation.
The two-year Treasury yield, which moves more on expectations for Fed actions, slumped to 0.62 percent from 0.71 percent as traders increase bets that the Fed will cut rates even deeper this year.
Health care stocks in the S&P 500 jumped 3.8 percent for the biggest gain by far among the 11 sectors that make up the index. UnitedHealth Group surged 10.1 percent, Anthem jumped 13.4 percent and Cigna rose 11.5 percent.
A Biden nomination would be more welcome on Wall Street than a nod for Sanders, who is campaigning on a proposal to enact "Medicare For All."
"It's probably a trend toward more of the same in terms of the market and the regulatory and business environment," said Ablin. "I don't think investors are looking for revolution."
Markets have been on edge for two weeks, with the S&P 500 down just under 10 percent from its record on Feb. 19, amid worries about how much economic damage the coronavirus will do. The big swings in recent days will likely continue until investors get a sense of what the worst-case scenario really is in the virus outbreak.
Indexes jumped on Monday, and the Dow had its best day in more than a decade on rising anticipation for coordinated support from the Fed and other central banks. That followed a dismal week that erased gains for 2020.
The tide rose around the world for stocks on Wednesday. In Europe, Germany's DAX returned 0.8 percent, the French CAC 40 rose 0.9 percent and the FTSE 100 in London gained 1 percent. IN Asia, South Korea's Kospi jumped 2.2 percent. Japan's Nikkei 225 inched up 0.1 percent, the Hang Seng in Hong Kong slipped 0.2 percent and stocks in Shanghai rose 0.6 percent.
