Share benchmarks rose Wednesday, following a roller-coaster session on Wall Street that saw a strong rally in the major benchmark indexes ending abruptly with a precipitous drop.
The Dow Jones Industrial Average edged 1.4% up, or 330 points. The S&P 500 rose 1.3%, while the tech-heavy Nasdaq Composite Index also advanced 1.3%. Tuesday, the blue-chip index gave up a 4.1% advance to close 0.1% lower.
“A vacuum of data is leading to this volatility, rather than a shift in sentiment,” said Edward Park. deputy chief investment officer at Brooks Macdonald. The shifting mood in oil markets is also impacting sentiment among equity investors, he said, as traders speculate about the outcome of a meeting between major crude oil producers on Thursday.
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The indicators came on top of the news that European Union finance ministers had suspended talks on an economic crisis response on Wednesday morning, underscoring the deep differences within the bloc over how to share the mounting costs of the health crisis. Ministers had hoped to agree to a package of measures that could have provided half a trillion euros worth of support for the economy.
“There’s disappointment,” said Florian Hense, European economist at Berenberg Bank. “The longer it takes for finance ministers and leaders to come up with a solution, the weaker their ability to sell it to their home audience. We’re not talking about economics any longer, but politics.”
Any agreement reached would be a welcome signal for markets, Mr. Hense said. Investors continued to pull out of Italian bonds, which are considered riskier assets. The yield on 10-year Italian bonds rose to 1.699%.
In a sign of investors’ wavering risk appetite, the yield on the 10-year U.S. Treasury ticked up to 0.764%, from 0.735% Tuesday, after declining earlier in the day.
In trying to assess the depth of the looming recession that will be triggered by the coronavirus shutdown, some investors are examining the support offered by the Federal Reserve, and how quickly it will prove to be effective in bolstering economic activity.
As well as slashing interest rates, the central bank announced other aggressive measures in March, pledging to buy government bonds, corporate-bond funds and municipal debt. It has boosted the short-term cash markets and even arranged to lend directly to companies.
“Bear markets tend to last longer than we think,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham. “Although we have shock and awe with relaunching QE, we don’t know that the on-the-ground economic support is going to be there quickly.”
In commodities, U.S. crude futures climbed 1.5% to $24.01 a barrel. American Petroleum Institute data released late Tuesday reportedly showed U.S. crude inventories rose by more than expected. The prices are too low for U.S. producers, leading to a significant slowdown in drilling activity, ING strategists said. The Energy Information Administration’s short-term energy outlook forecasts that U.S. oil output in 2020 will decline by 470 million barrels a day from the previous year, taking it down from a previous forecast of 770 million barrels a day growth.
The U.S. death toll from the new coronavirus rose sharply, with nearly 50% more people killed Tuesday than any previous day in the epidemic, according to a Wall Street Journal analysis of data from Johns Hopkins University. European countries with falling infection rates began easing their restrictions, while some Asian leaders called for extended lockdowns to fight the pandemic.
In Asia, Japan’s Nikkei 225 closed 2.1% higher. Late Tuesday, the government said it plans to pay households and businesses directly as part of a nearly $1 trillion economic package. It could subsequently use stimulus money to encourage consumer spending and travel.
Investors are watching closely for when U.S. infections peak and start to decline, and when shutdowns are lifted, according to Kelvin Tay, regional chief investment officer at UBS Global Wealth Management in Singapore. In time, he said, investor focus would shift to 2021 corporate earnings, and how quickly economic activity can recover.
Since the Federal Reserve last month made use of a range of tools—adopting “the entire playbook” it developed during the 2008 global financial crisis—in quick succession, market functioning has improved, Mr. Tay said. “The markets have exited the panic-selling mode.”
Later in the day, the Fed is scheduled disclose what was discussed at its meetings in the first half of March, offering fresh insights into policy makers’ willingness to take additional steps as the outlook deteriorates. Costco Wholesale will also report March sales after the closing bell in New York, giving investors a view on how the pandemic has affected the retailer’s operations.