Wall Street’s gains fade as investors’ jitters persist.
Stock climbed Friday, rebounding from their worst day in more than 30 years, with gains that were pinned partly to signs of movement in Washington and a pledge by leaders in Germany to spend heavily to support Europe’s largest economy.
But investor nervousness persisted and an early rally on Wall Street faded. The S&P 500 was up about 1 percent by midday, after initially jumping as much as 6 percent. Trading in Europe followed a similar pattern, with major indexes surging as much as 10 percent early in the day before fading as the week ended.
Financial markets have been nothing if not inconsistent for the past three weeks, plunging and then rising, and then plunging again, as each day brought new measures to contain the outbreak and new worries that the economy, workers and businesses would take a hit as a result of them.
On Thursday, stocks on Wall Street and in Europe plunged in their biggest daily drop since the stock market crashed in 1987, as President Trump’s ban on the entry to the United States from most European countries disappointed investors, who had been waiting for Washington to take stronger steps to bolster the economy.
But late Thursday, House Speaker Nancy Pelosi said that she and Treasury Secretary Steven Mnuchin had “resolved most of our differences” on a package of economic aid for workers and companies, pledging a vote in the House of Representatives on Friday.
And on Friday, Germany’s government said that it would make more than $600 billion available to help companies there, while France pledged to unleash tens of billions of euros to prevent a potential jump in unemployment by paying small and medium-size businesses slammed by the epidemic to keep workers on furlough.
Olaf Scholz, the German finance minister, said that his government could take further steps, including taking stakes in companies, if deemed necessary. “We can’t forget the lessons of the previous financial crisis,” Mr. Scholz told reporters in Berlin.
Also on Friday, the Federal Reserve Bank of New York moved again to inject more liquidity in the Treasury markets, saying it would complete half of its planned $80 billion of government bond purchases for the month today.
“These purchases are intended to address highly unusual disruptions in the market for Treasury securities associated with the coronavirus outbreak,” it said in a statement.
The volatility in markets this week reflects the increasing concern that governments and central banks may not be able to meaningfully mitigate the economic fallout from the spreading coronavirus.
Asian indexes were hammered on Friday following the U.S. market plunge. Like Wall Street, every major financial market in Asia except for China is now firmly in bear market territory.
The Fed will inject more liquidity into the Treasury market.
The Federal Reserve Bank of New York is buying up a variety of Treasury securities in a bid to keep markets functioning normally after trading in government debt broke down earlier this week — and that effort to help became even more substantial on Friday.
The bank said it would pull forward its planned monthly purchases, which total $80 billion, so that half of them would be done by the end of the day. It would also “bring forward remaining purchases for this monthly calendar and adjust terms of operations as needed to foster smooth Treasury market functioning,” it said in a statement.
The swift action suggested to some investors that there could be more to come, and stock prices rallied on the back of the announcement.
“It’s a signal that they are diagnosing what it going on in the market,” said Julia Coronado, founder of MacroPolicy Perspectives. “It’s a signal that we’re likely to get quantitative easing next week, if not before.”
But just as the Fed was pulling out the stops, President Trump was tweeting about the central bank’s inaction.
“The Federal Reserve must FINALLY lower the Fed Rate to something comparable to their competitor Central Banks,” he wrote. “Jay Powell and group are putting us at a decided economic & physiological disadvantage.”
The Fed was ahead of its global counterparts in reacting to the coronavirus’s economic threat, slashing rates by half a percentage point last week in its first emergency move since the financial crisis. It is widely expected to lower rates again at its meeting next week, and analysts think it could revive more aggressive bond-buying, among other measures meant to cushion the market and real-economy fallout of the global pandemic.
Mnuchin says U.S. in ‘second inning’ of stimulus efforts.
Treasury Secretary Steven Mnuchin vowed on Friday that the United States government would do whatever was necessary to ensure that markets have “almost unlimited” liquidity. He said that the economic relief package being negotiated with Congress was just the beginning of efforts to stimulate the economy in the wake of the coronavirus.
“I think we’re like in the second inning of getting things done,” Mr. Mnuchin said on CNBC.
The Trump administration is considering additional relief measures, including a payroll tax holiday. Mr. Mnuchin also said that the administration is working on exemptions from tariffs imposed by President Trump that are affecting businesses, and that he would be open to waiving restrictions on withdrawals for 401(k) investments so that people can more readily access their savings.
The Treasury secretary dismissed rumors that markets could shut down because of the recent volatility, and he encouraged banks to turn to the Federal Reserve’s discount window for funding if needed.
Mr. Mnuchin expressed optimism that the current “black swan” period would be over in a matter of months, and pent-up demand would jump-start the economy.
A hang-up in Congress: Who should be paid not to work?
A fundamental divide over how many Americans should be paid to stay home from work amid the coronavirus outbreak has emerged as one snag in negotiations over a multi-billion-dollar federal response to the mounting health and economic damage from the virus.
House Democrats are set to vote Friday on a bill, negotiated with Treasury Secretary Steven Mnuchin, that includes several measures meant to combat the spread of the virus and cushion its economic shock to the economy. One of those is a plan to provide paid leave to workers affected by the virus.
A key question is how many workers should be covered by that leave plan, which would ensure compensation for people who do not go to work during the outbreak. Many Republicans want to keep it focused narrowly to workers who have contracted the virus or are forced to care for sick family members or children whose schools have closed — and they are concerned that the bill, more broadly written, could also encourage healthy people to stay home, thus chilling economic activity.
Many Democrats say legislation should go further, and protect workers from being forced to expose themselves to the virus.
The ultimate legislation could affect both the health of the economy and the speed at which the disease spreads.
China adds its central bank firepower.
China’s central bank on Friday moved to free up money to help the country’s economy, joining a growing number of global policymakers worried about the impact of the fast-moving coronavirus.
The People’s Bank of China said it would inject $79 billion into its financial system, in a move that indicated Beijing remains concerned about its domestic economy after weeks of virtual shutdown.
The central bank eased the financial cushion it requires lenders to keep — cutting the so-called reserve ratio requirement by up to 1 percentage point for some banks — to loosen up money and encourage lending.
China’s economy was already struggling with its slowest growth in nearly three decades before the coronavirus hit, disrupting business and leading to the virtual shutdown of business across China for six weeks.
The bank said on Friday that the move was done “in order to support the development of the real economy” and reduce the cost of financing for businesses.
Here’s what else is happening.
Berkshire Hathaway said it will not allow shareholders to physically attend its May 2 annual meeting in Omaha, Neb., which will be streamed online. All special events around the meeting were canceled.
The travel and tourism industries could lose up to 50 million jobs as the coronavirus pandemic saps demand for their services, the World Travel and Tourism Council said on Friday. To preserve jobs, the group said governments should remove barriers to travel, cut taxes, provide incentives and support promotional campaigns.
American consumers were slightly less confident in early March compared to a month ago, according to the latest University of Michigan consumer confidence index, reflecting early fears about the spread of coronavirus and its impact on the stock market. The index fell to 95.9 in March, which the survey described as a “modest decline” from 101.0 in February.
“The Tonight Show Starring Jimmy Fallon,” “The Late Show With Stephen Colbert” and “Late Night With Seth Meyers” will suspend production next week, CBS and NBC said Thursday, making them the biggest daily American television series to go dark because of concerns surrounding the coronavirus pandemic
Disney will close its theme parks worldwide starting this weekend, including Disney World in Florida and the Disneyland Resort in California. Disney Cruise Line will also close.
Reporting was contributed by Alexandra Stevenson, Jeanna Smialek, Niraj Chokshi, Jim Tankersley, Cao Li, Amie Tsang, Carlos Tejada, Brooks Barnes, Mohammed Hadi and Katie Robertson.