- The Dow Jones soared around 900 points on Wednesday.
- Sturdy economic data and Fed easing expectations have steadied a nervous stock market. The comeback of Joe Biden isn’t hurting sentiment either.
- But Ray Dalio has broken his silence on the coronavirus, and he warns of a terrible impact on financial markets.
The Dow Jones rallied 900 points on Wednesday after Joe Biden’s big night mixed with a global central bank stimulus effort to trigger dip-buying in the U.S. stock market.
But while Dow bulls are regaining their unbridled optimism, hedge fund billionaire Ray Dalio warns that the coronavirus outbreak could be a catastrophic risk event for financial markets.
Dow Jones Rallies on Fed Stimulus & Biden Bounce
Plugging their ears to Dalio’s dire warning, all three major U.S. stock market indices rallied aggressively on Wednesday.
- The Dow rose 896.12 points or 3.46% to 26,813.53.
- The S&P 500 climbed 3.1% to 3,095.47.
- The Nasdaq bounced 2.74% to 8,921.81.
In the commodity sector, crude oil climbed alongside the stock market, only to slide into the red (-0.6%) in late afternoon trading. The gold price dipped 0.17% as fear receded on Wall Street.
On the data front, robust non-farm employment data and a stellar ISM non-manufacturing PMI reading reassured investors about the resilience of the U.S. economy.
But economic stimulus may be doing more to lift the Dow Jones than the fundamentals underlying economy itself. Considerable measures of liquidity and lower interest rates are being priced in around the world.
Although economists remain skeptical about the impact that the Fed can have on the stock market, Dow bulls continue to buy the dips aggressively – aided by substantial repo actions.
The fact that Joe Biden is now a firm favorite to win the Democratic nomination is the final catalyst for the brighter mood in the stock market today.
Alarming IMF Forecast Fails to Worry Stock Market
Despite the rally in the Dow, economic forecasts continue to be downgraded, as the IMF now expects a much more severe hit from the impact of COVID-19.
Sentiment may be trending toward risk-on, but the coronavirus outbreak hasn’t stopped intensifying.
Italy has more than 3,000 cases and is joining Japan in closing its schools nationwide.
Los Angeles County – the largest U.S. county by population and GDP – declared a state of emergency after five more cases were confirmed. The nation’s wealthiest city, New York, added four more cases of its own.