Stocks claw back some ground on Wall Street; Dow gains 2%

Stocks are clawing back some of their recent losses Friday morning at the end of a brutal week of selling as the spreading coronavirus heightened fears of a global recession.

The gains follow the worst slide for the U.S. market since the Black Monday crash of 1987 and one of the worst drops for Europe on record.

The Dow Jones Industrial Average rose 554 points in morning trading, a 2.6% gain. That’s less than a quarter of what the Dow lost a day ealier. It had briefly been up more than 1,300 points in the earlier going.

The benchmark S&P 500 index climbed 2.7%. Major indexes in Europe climbed about 4%. Bond yields moved broadly higher, a signal some investors were pulling back, at least for now, from seeking safety in low-risk assets.

Even with pickup, the stock market is still on track for its worst week since October 2008, during a global financial crisis. In just a few weeks, U.S. stocks have wiped out all the gains made during 2019 — one of the best years for the market in decades. All the major indexes are in what traders call a bear market.

The market’s rout intensified this week amid a torrent of cancellations and shutdowns around the globe as governments and businesses attempted to stem the spread of the outbreak. On Thursday, Disney said it would close its theme parks in the U.S., one of many closures by businesses that have fueled fear that a severe pullback in consumer and business spending will tip the U.S. economy into a recession and wreck corporate profits this year.

Investors have been clamoring for strong action from the U.S. government to combat the economic impact of the virus outbreak. News that the White House and Congress are close to announcing an agreement on a package aimed at reassuring anxious Americans by providing sick pay, free testing and other resources helped boost the market.

“We’re finally getting that a little late to the party, but it’s better to be late to the party then not to come to the party,” said Ryan Detrick, senior market strategist at LPL Financial. He said he the stimulus plan should help cushion the financial impact to people and businesses.

Treasury Secretary Steven Mnuchin said Friday morning on CNBC that the two sides were “very close to getting this done.”

The rally was broad, with technology stocks accounting for a big slice of the gains. Shares in cruise line operators, airlines and hotels — among the hardest-hit stocks as people canceled vacations and companies shut down business trips — notched gains.

Oil companies also rose as the crude oil prices climbed 2.6%, a rare move in recent weeks. The price of U.S. crude has fallen sharply in anticipation of less demand as businesses reacted to the coronavirus. Prices have also been pulled lower by a price war among big oil producers.

The wild swings this week have come as governments stepped up precautions against the spread of the new coronavirus and considered ways to cushion the blow to their economies.

More central banks, including those of China, Sweden and Norway, stepped in to support bond trading, a day after similar interventions from the Federal Reserve and the European Central Bank.

The Federal Reserve unexpectedly cut its benchmark interest rate by half a percentage point last week. On Thursday, it unveiled a massive short-term lending program to try to help smooth trading in U.S. Treasurys. Many economists expect the Fed will move to cut interest rates by a full percentage point, to nearly zero, at its meeting of policymakers next Wednesday.

Markets worldwide have been on the retreat as worries over the economic fallout from the coronavirus crisis deepen. Friday’s gains in the U.S. and Europe were the latest chapter in a period of remarkable volatility for markets, with major indexes plunging into bear market territory at record pace. Asian markets ended a volatile day mostly lower.

The sell-off on Wall Street Thursday helped to wipe out most of the big U.S. gains since President Donald Trump took office in 2017.

The S&P 500’s drop put it way over the 20% threshold for a bear market, officially ending Wall Street’s unprecedented bull-market run of nearly 11 years.

The sell-off has been so sharp that there remains the potential for a significant bounce after the virus and its impact begin to recede, Detrick said. The economy was already on solid footing and well-known companies like Disney and Apple were could help lead a recovery.

He also said there could be a recession on the horizon, but it would likely be mild at this point.

“It could be a shallow, quick, violent scary recession, but one that bounces back quickly,” Detrick said.

The worldwide rout has come amid cascading shutdowns and travel restrictions across the globe — including Trump’s suspension of most travel to the U.S. from Europe — and rising worries that the White House and other authorities around the world can’t or won’t counter the economic damage from the outbreak any time soon.

For most people the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illnesses, including pneumonia. The vast majority of people recover from the virus in a few weeks.

Initially, many hoped the virus would be contained in China. But as the damage and disruptions from the outbreak mount, the combined health crisis and the market retreat have heightened fears of a global recession.

Just last month, the Dow was boasting a nearly 50% increase since Trump took the oath of office on Jan. 20, 2017. It officially went into a bear market on Wednesday, finishing down more than 20% from its all-time high. For the S&P 500, this is the fastest drop since World War II from a record high to a bear market.