Dow surges 1,300 points, rebounds from three-year low, on hope a coronavirus rescue bill is close

Stocks jumped on Tuesday as investors hoped U.S. lawmakers were close to an agreement on  a stimulus bill to rescue the economy from the coronavirus.

The Dow Jones Industrial Average rebounded from its lowest level in more than three years, trading more than 1,300 points higher, or 7.1%. The S&P 500 gained 6.2% while the Nasdaq Composite advanced 5.7%.

Boeing gained more than 17% to lead the Dow higher. Chevron and United Technologies also rallied more than 11%. Energy was the best-performing sector in the S&P 500, soaring 9.3%, while industrials jumped 7.2%.

House Speaker Nancy Pelosi told CNBC’s Jim Cramer there is “real optimism” in Congress over a stimulus deal being reached in the next few hours. Senator Chuck Schumer and Treasury Secretary Steven Mnuchin said they hope to have a deal by Tuesday morning. “There are still a few little differences. Neither of us think they are in any way going to get in the way of a final agreement,” Schumer said. 

“From a market perspective … it feels like we’re coming to the end of it,” said Michael Novogratz, CEO of Galaxy Digital, on CNBC’s “Squawk Box.” Novogratz started buying into this market on Monday, he said. “It doesn’t necessarily mean the market’s going to go up, but a lot of that crazy volatility is kind of coming out.”

Tuesday’s moves followed yet another stormy day on Monday as investors swung back to pessimism and pushed the major indexes to new multiyear lows as a procedural vote in the Senate on a bill failed for the second time in 24 hours.

The Dow dropped 582.05 points, or 3%, to a new three-year low on Monday and remained on pace to clinch its worst calendar month since 1931. The S&P 500 dropped 2.9% and was more than 30% from a record close set on Feb. 19.

“The recent disorderly market action has left scars on most money managers,” said Sean Darby, global equity strategist, in a note. “Bear markets are brutal and they typically presage a recession.”

Stocks hardest hit by the shutdowns resulting from the coronavirus led the gains in premarket trading Tuesday. Shares of Wynn and MGM Resorts were both up more than 10%. Delta Air Lines jumped more than 14%. General Motors shares, meanwhile, climbed nearly 6% after the automaker announced it will keep its dividend. 

Democrats have criticized the $500 billion fund that the Republican proposal sets aside for distressed businesses, calling it a bailout fund “with no strings attached.”

“I think the limit of time as to how long these negotiations will go on, will be set by the initial unemployment claims that come out on Thursday,” Steven Ricchiuto, chief U.S. economist at Mizuho Securities, told CNBC’s “Squawk Box Asia” on Tuesday morning Singapore time.

“I don’t think there’s any representative in the House or … in the Senate who’s gonna be willing to sit back and debate a lot of issues … and political talking points when you have what could be essentially as many as 3 million people filing for unemployment insurance,” Ricchuito said.

Tuesday’s gains also came as President Donald Trump signaled he was eager to reopen the economy, despite concerns of public health officials.

“At some point we’re going to open up our country, and it will be fairly soon,” Trump said during an evening press briefing on the fast-spreading virus.

Markets are getting support from the Federal Reserve, which said Monday it would embark on an open-ended asset purchase program. The central bank said the program will run in the “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”

“This market has been utterly dangerous since February,” wrote Fundstrat’s Tom Lee in a note Tuesday. “But there are glimmers of hope.”

The spread of the coronavirus also forced the New York Stock Exchange to conduct its first day of fully electronic trading. The exchange said last week that two people tested positive for the disease at screenings it conducted this week.

—CNBC’s Eustance Huang contributed to this report.

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