Stocks Stabilize, Treasury Yields Tick Higher
February 26 2020 - 11:34AM
Dow Jones News
By Anna Isaac and Alexander Osipovich
U.S. stocks bounced back Wednesday as investors snapped up risky
assets, in hopes that the sharpest economic impacts of the
coronavirus epidemic are over.
The Dow Jones Industrial Average gained 402 points, or 1.5%, in
morning trading. The S&P 500 rose 1.5%, while the Nasdaq
Composite jumped 1.8%.
Investors were hoping for markets to stabilize after the Dow
fell more than 1,900 points Monday and Tuesday in its largest
two-day point decline on record. Markets were spooked this week by
a growing number of coronavirus cases outside China and fears that
the epidemic would dent corporate earnings and global growth.
"You're seeing a bit of a relief rally," said Jon Adams, senior
investment strategist at BMO Global Asset Management. "There is
some hope that we've reached maximum impact from the
coronavirus."
Treasury yields also ticked higher. The yield on the benchmark
10-year note rose to 1.352% in volatile trading. On Tuesday, it
settled at an all-time low of 1.328% as fund managers sought the
safety of government bonds, extending a decadeslong rally.
Yields had been under pressure in recent days in part because of
a growing expectation among investors that the Federal Reserve may
cut interest rates at least two times later this year.
Still, the situation remains highly fluid, with investors
jittery over any fresh news about outbreaks of the coronavirus and
governments' efforts to contain them.
"This is a time of peak uncertainty for coronavirus," said
Edward Park, deputy chief investment officer at Brooks Macdonald.
"We don't yet know the size of how much it's spread or the
mortality rate. That's what markets are reacting to, peak
uncertainty, rather than facts."
The recent surge in volatility in U.S. equity markets showed
some signs of abating. The Cboe Volatility Index, a closely watched
measure of market turbulence known as VIX, fell more than 9%
Wednesday, a day after hitting its highest levels in more than a
year.
In Europe, the pan-continental Stoxx Europe 600 wavered between
gains and losses, and was recently down less than 0.1%.
Earlier, Asian markets closed lower. Japan's Nikkei 225 index
shed 0.8% to reach its lowest level since October. Australia's
S&P/ASX 200 dropped 2.3% and Korea's Kospi retreated 1.3%.
Crude oil prices gained, reversing three days of losses, after
fresh data on Wednesday showed U.S. crude inventories rose less
than expected. U.S. crude futures gained 0.8% to $50.32 a
barrel.
Deaths and confirmed cases of the coronavirus have continued to
climb outside China -- notably in Italy, Iran, Japan and South
Korea. Concerns among investors that the virus will spread further,
disrupting the global economy, triggered the two sharp consecutive
stock selloffs this week.
Many European and Asian benchmarks, including those in Germany,
Japan, and South Korea are now solidly in negative territory for
the year. Germany's DAX is down more than 3% year-to-date, while
Hong Kong's Hang Seng Index and the Kospi in Seoul have both
declined more than 5%.
"The market is pricing in a significant slowdown in global
growth and corporate earnings," said Ong Zi Yang, senior macro
analyst at FSMOne.com in Singapore. "It is hard to quantify the
economic impact now but there will definitely be a slowdown."
In currencies, the British pound fell 0.6% against the dollar
amid concerns about the government's mandate for trade talks with
the European Union, which is due to be made public Thursday.
Chong Koh Ping contributed to this article.
Write to Anna Isaac at anna.isaac@wsj.com and Alexander
Osipovich at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
February 26, 2020 11:19 ET (16:19 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.