Stock markets close higher as investors shake off coronavirus fears — for now
TSX and Dow start strong, sell off through the morning, rally again in the afternoon
A day after their worst declines in decades, stock markets and the price of oil see-sawed Tuesday as investors faced up to the potential of COVID-19 spreading and hurting economies around the world.
The Toronto Stock Exchange gained 443 points, or more than three per cent, while the Dow Jones Industrial Average gained more than 1,000, or five per cent, on one of the more volatile days on the stock market in recent memory.
Major stock indexes started the day strong, rebounding from Monday's record lows with a mini rally off the lows. But that optimism soon dissipated as fears about the economic impact of the coronavirus returned.
North American stock markets bounced up and down for most of the day before moving decisively higher after U.S. Vice-President Mike Pence said U.S. health insurers have agreed to waive co-pays on coronavirus testing.
"It seems like that yesterday was such a collection of so much bad news, it shocked the market down," said Rick
Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. "Today, with fresh eyes, people are picking out the names they think have dropped the most."
Oil made back some of the huge losses it posted on Monday, with WTI rising $3.37 a barrel on Tuesday, to $34.50. That was a boost for some energy names on the TSX that had been big losers the day before. Even hard-hit Canadian banks made up some ground, and airline shares were up too.
The coronavirus that causes COVID-19 has spooked stock market investors this week as they worry about the worst-case scenario for corporate profits and the economy, where factories and supply chains are shut around the world due to quarantines and people stay huddled at home instead of working or spending.
That's why many say the market will continue to swing sharply at least until the number of new cases decelerates.
Until the market has a clear picture of how bad the virus outbreak will be in North America, stock markets are in for a wild ride, says Paul De Sousa, senior vice-president at Sightline Wealth Management in Toronto.
"People have been lulled into a false sense of complacency," he said, cautioning that volatility will be the name of the game for a while.
"There's always a reversion to the mean in markets," he said in an interview, "and now we've swung the pendulum dramatically in the opposite direction."
Investors have had a "sell-first, ask questions later" reaction to the uncertainty, said Greg McBride, chief financial analyst at Bankrate.com.
Still, he urges investors to avoid changing their long-term investment strategies, which can play out over years or decades, because of short-term volatility.
"Markets fall quickly, but they can rebound rapidly," McBride said. "Investing is a marathon, not a sprint."
With files from The Associated Press and Reuters