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US stocks stabilized Thursday, closing slightly higher as central banks made fresh moves to ease Wall Street’s fears about the coronavirus epidemic.
The Dow Jones industrial average gained 188.27 points, or 1 percent, to close at 20,087.19 after an early selloff threatened to continue the market’s brutal downturn amid the coronavirus pandemic. On Wednesday, the blue-chip index had closed below 20,000 for the first time in three years.
“It felt like the trading was exhausting itself today. People were buying but it just wasn’t breaking through,” said Philip Streible, chief market strategist at Blue Line Futures. “The bright spot was China. They’re getting back up and running. The bad news was Italy.”
The Dow still has yet to close below the closely watched mark of 19.827.25 — its closing price on Jan. 20, 2017, the day that Donald Trump was sworn into office as president. But it has dipped below that level several times this week.
The S&P 500 on Wednesday climbed 0.5 percent to close at 2,409.39. The Nasdaq was up 2.3 percent at 7,150.58.
Stocks found their footing after the European Central Bank announced a massive debt-buying program and the Federal Reserve broadened its already aggressive effort to keep markets afloat during the pandemic. Congress is also working on a $1 trillion stimulus package to aid workers during the crisis.
While the markets are welcoming promises of a stimulus, “I think this is more just a straight up bounce and sort of a wave of investors,” said Lamar Villere, portfolio manager of the Villere Balanced Fund. “You’ve flushed out a lot of the people who are scared.”
The European Central Bank announced plans Wednesday to buy as much as 750 billion euros ($809 billion) in private- and public-sector securities through a new “Pandemic Emergency Purchase Program.” The move came with a promise from bank president Christine Lagarde that there were “no limits” to the steps officials would take to protect the economy from the coronavirus.
Some European markets jumped on the news Thursday morning. Four major indexes there turned negative in the afternoon but later recovered and closed in the green.
“The monetary easing has been coming thick and fast recently and while I have no doubt that it’s making a huge difference and will continue to do so for the rest of the year, investors just haven’t been buying it,” OANDA senior currency analyst Craig Erlam wrote in a commentary.
The Fed also expanded currency swap lines to more countries Thursday morning after announcing a program late Wednesday to offer financial institutions loans backed by assets bought from money market mutual funds. The central bank has also slashed interest rates and restarted its quantitative easing program this week.
“Government resources are unlimited when they have the central bank behind them with its money-printing capabilities that knows no limits,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in a Wednesday evening note. “Investors must know the world has changed. The world’s economic leaders will not rest until the financial world is on a firmer footing.”
Thursday’s volatile stock movement came as the coronavirus pandemic continued to rock the US economy. The number of people applying for unemployment benefits jumped 33 percent last week to 281,000, an early sign that the virus is forcing companies to lay off workers. Experts expect the number to grow even further as job losses spread.
Financial markets likely won’t get a break until health officials get the coronavirus under control, according to Savita Subramanian, equity and quant strategist at Bank of America. She noted that stock indexes in Hong Kong and Shanghai didn’t hit a trough during the 2003 SARS epidemic until after the number of daily confirmed cases peaked.
“Whereas the Fed and fiscal stimulus are widely seen as market panaceas, so far they have not been particularly potent,” Subramanian said in a Thursday note. “In a pandemic, new cases matter.”
