The Dow and the broader US stock market rallied Monday, as stocks rebounded from last week’s sharp selloff over potential fallout from the global coronavirus outbreak.
An onslaught of quarantine measures and travel restrictions imposed by companies and governments worldwide led to a perception that the virus outbreak will likely be contained.
This put US and European stock markets at ease on Monday, even though the risk surrounding the outbreak is not eliminated and the economic repercussions are yet to be determined.
China’s central bank also stepped in to prop up the market, giving investors around the world confidence that the fallout would be somewhat managed.
The Dow (INDU) closed up 0.5%, or 144 points, after climbing as many as 374 points during Monday’s trading session, retracing some of its losses from last week. The index had finished down more than 600 points on Friday.
The S&P 500 (SPX) closed up 0.7%, while the Nasdaq Composite (COMP) finished 1.3% higher.
“It seems many investors just want to ‘buy the dip’,” wrote Edward Moya, senior market analyst at Oanda in a not to clients. Investors often try to buy stocks after a sell-off, betting that companies’ fundamentals are strong enough to overcome the negative sentiment.
Both the Dow and the S&P 500 erased all their January gains Friday over the virus scare, and they ended the month in the red.
Meanwhile, Chinese equities had their worst day in nine years upon reopening after the Lunar New Year holiday during which the outbreak intensified.
Oil prices remained under pressure, as the outbreak is weighing on demand for the commodity. US oil prices briefly dropped below $50 a barrel Monday, and settled at $50.11 a barrel. They haven’t been this low since January 2019.
Elsewhere, traditional safe haven assets like gold and US Treasury bonds are down as stocks rebound and demand for safety bets wanes.