U.S. markets post big gains as Biden's surge offers coronavirus respite
U.S. stock markets surged Wednesday after Joe Biden's Super Tuesday run made him a formidable moderate counterweight to Sen. Bernie Sanders' economically disruptive proposals in the Democratic presidential race. The Dow Jones industrial average ended the day up nearly 1,200 points, or more than 4.5%.
The rebound comes amid an especially volatile window of trading, with coronavirus panic spawning a brutal sell-off that had erased trillions in value from global markets. On Tuesday, the Federal Reserve delivered its first emergency rate cut since the 2008 financial crisis — bringing the benchmark down 50 basis points. But the central bank's move seemed to reinforce panic on Tuesday, rather than easing it, sending the three major U.S. indexes down and landing them back in correction territory.
Yet on Wednesday, it became clearer that the former vice president had captured primary wins in 10 states, including Texas, a showing that propelled him to the front of the field. Sanders, I-Vt., may still score the day's biggest prize, California, where he is leading.
"Bernie Sanders' socialist program includes lots of proposals to increase taxes and regulations, which would weigh on the economy and corporate earnings," said Ed Yardeni, president of Yardeni Research. "The market's sell-off last week on Sanders' primary victories and rebound on Monday after Biden's big win in South Carolina and this morning after Super Tuesday suggest that domestic U.S. politics may matter as much as the global health crisis to investors."
The Dow surged hundreds of points in the final minutes of the session, closing at 27,091, up 1,173 points on the day. The Standard & Poor's 500-stock index finished up 4.22%, while the tech-heavy Nasdaq composite index closed with a 3.85% gain. Mike Bloomberg's retreat from the Democratic presidential primary and a report showing unexpected growth in the U.S. service sector added to Wall Street's feel-good vibe.
"Investors are shifting from the coronavirus to politics, and the market knows how to play politics better than the virus," said Howard Silverblatt of S&P Dow Jones Indices. "But stocks could turn on a dime if there is a new memo on the coronavirus."
Health-care stocks roared nearly 6%, leading all 11 market sectors, in response to Biden's performance. That eased the industry's worries about Sanders and his Medicare-for-all plan. Cigna and UnitedHealth Group were up more than 10% in afternoon trading. Humana saw a 12.7% spike while Anthem closed in on nearly 14.4%. UnitedHealth, a Dow component and industry barometer, had its best day in a decade. Big Pharma also had a good day, with Pfizer and Johnson & Johnson flying 5%.
"Sanders' win would be perceived as an increased risk for health insurers since he proposes a free comprehensive national health insurance program for all Americans, potentially leading to the elimination of the existing health insurance system," said CFRA Research analyst Sel Hardy in a note published Wednesday. "Biden on the other hand, proposes a more moderate change to the private insurance system that will build on the Affordable Care Act, aiming to give more affordable choices on insurance plans, reducing health care costs, and making the healthcare system less complex."
On Wednesday, the International Monetary Fund announced that it is proposing $50 billion in emergency funding to combat the coronavirus for low-income and emerging market countries. IMF managing director Kristalina Georgieva said the outbreak was a global problem "calling for a global response."
The World Health Organization said Tuesday that covid-19, the disease caused by the virus, has killed about 3.4% of those diagnosed with the illness — a higher rate than estimated previously. On Wednesday, the number of new coronavirus deaths reported outside China exceeded those reported inside the country — the center of the outbreak — for the first time.
Markets also were rattled as the yield on 10-year Treasury notes sank to an all-time low Tuesday. Bonds are a safe haven for investors in times of turmoil, and bond yields decrease as bond prices increase. Gold, another safe haven, climbed 2.9% Tuesday and has continued to rise, now trading at $1,647 per ounce.
"The 10-year treasury is a great barometer to measure fear," Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers, wrote in commentary Wednesday. "With a closing yield Tuesday at an all-time low of less than 1%, markets are reflecting a heightened amount of uncertainty related to the coronavirus and macroeconomic implications."
European markets mirrored U.S. optimism Wednesday, with the benchmark Stoxx 600 index, Germany's DAX and France's CAC 40 all up more than 1.4% in midday trading. Britain's FTSE 100 climbed 1.6%. Asian markets closed to mixed results, with Hong Kong's Hang Seng closing down 0.25% and Japan's Nikkei 225 weakly positive.
Fears about the coronavirus presence in the United States has spiked as the death toll reached 11 on Wednesday, and new research has revealed that the virus had probably been spreading undetected in California and Washington for weeks. Americans are beginning to face disruption to their work and travel, and the list of major events canceled in the face of the outbreak grows by the hour. Many grocery stores and pharmacies report being cleaned out of bottled water, disinfectant products and shelf-stable and frozen foods.
Investors are looking forward to ADP payroll numbers and fresh manufacturing data Tuesday to further suss out the damage the coronavirus has done to the global economy. Analysts are predicting global economic growth could slow to the lowest levels since the financial crisis this quarter.
