North American stock markets rebound with strong gains after massive Monday sell-off
A day after one of their worst days in history, North American stock markets were up slightly on Tuesday as bargain hunters did a little cautious buying on the Toronto Stock Exchange and the New York Stock Exchange.
The TSX and Dow Jones industrial average both bounced up around 400 points nearing midday. Both jumped toward big gains at the open, before giving up most of them and then seesawing up again.
That was a marked departure from Monday, when the TSX plunged 10 per cent and the Dow lost almost 13 per cent as investors woke up to the reality that the coronavirus that causes COVID-19 has the potential to wallop the North American economy.
«Surprise, surprise, there was bottom fishing. Investors went bargain hunting,» said Francis Lun, a stock analyst in Hong Kong.
The cautious buying on Tuesday stemmed from hopes that governments at various levels are standing ready to do whatever it takes to keep the economy running amid widespread shutdowns and quarantines.
Closing businesses can help slow the spread of the virus, but it also takes cash out of the pockets of companies and workers.
From parked airplanes to empty restaurants, nobody knows when economies might revive or even when countries will be able to get the spread of the virus under control. That has filtered down into stock markets as just about every sector is worth much less today than it was a few short weeks ago, with the world waking up to the prospect of a worldwide recession.
«The recession we expect now is going to be much deeper – and lasting for at least one quarter more – than our previous forecast,» said economist Stephen Gallagher, with French investment bank Societe Generale. «The pullback could be deeper as cancellations and closures spread.»
Wall Street’s so-called fear gauge, the Cboe Volatility Index, or VIX, almost doubled on Monday to 82.69. That’s higher than it was during the 2008-09 financial crisis.
The VIX was slightly lower Tuesday but wild swings up and down in markets show volatility is very much the new normal at the moment.
«A slightly more positive tone is sweeping through global financial markets on betting that fiscal relief may be arriving to complement aggressive monetary policy actions,» Scotiabank economist Derek Holt said.
«Details as yet are sparse,» said analyst Jasper Lawler, with the trading platform LCG. «Investors are pinning their hopes on governments flooding people and businesses with enough cash to survive months of a coronavirus-induced lockdown.»
The Canadian dollar traded for 70.77 cents US Tuesday, compared with an average of 71.61 cents US on Monday.
