U.S. markets post big gains as Biden’s rebound offers coronavirus respite

U.S. stock markets surged Wednesday after a stunning Super Tuesday run that set up former vice president Joe Biden for a showdown with Vermont Sen. Bernie Sanders and transformed the Democratic presidential race.

The Dow Jones industrial average ended the day nearly 1,200 points up, or more than 4.5%.

The rebound comes amid an especially volatile window of trading, with coronavirus panic spawning a brutal sell-off that has erased trillions in value from global markets. On Tuesday, the Federal Reserve delivered its first emergency rate cut since the 2008 financial crisis — bringing the benchmark down 50 basis points—but the central bank’s move seemed to reinforce panic rather than ease it, with all major U.S. indexes down and landing back in correction territory.

The former vice president captured primary wins in 10 states, including Texas, a showing that propelled him to the front of the field. Sanders may yet score the night’s biggest prize, California, where he is leading.

“Bernie Sanders’ socialist program includes lots of proposals to increase taxes and regulations, which would weigh on the economy and corporate earnings,” said Ed Yardeni, president of Yardeni Research. “The market’s sell-off last week on Sanders’ primary victories and rebound on Monday after Biden’s big win in South Carolina and this morning after Super Tuesday suggest that domestic U.S. politics may matter as much as the global health crisis to investors.”

The Dow Jones industrial average flirted with a 1,200-point gain in the last few minutes of the trading session. The Standard & Poor’s 500 index was up more than 4% while the tech-heavy Nasdaq was well above 3%.

Stocks of health care companies roared in response to Biden’s performance. Indianapolis-based Anthem soared nearly 14%. Cigna was up more than 10% in morning trading, while UnitedHealth Group rose nearly 12%.

“The one-two punch thrown on Tuesday by the big Fed rate cut and the Biden win last night has put a floor under the stock market for now so investors are giving a huge sigh of relief and short-sellers are exiting stage left,” Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in commentary Wednesday. “The coronvirus market sell-off looks to be stabilizing.”

Health-care stocks roared nearly 6%, leading all 11 market sectors, in response to Biden’s performance. That eased the industry’s worries about Sanders and his Medicare-for-all plan. Cigna and UnitedHealth Group were up more than 10% in afternoon trading. Humana saw a 12.7% spike while Anthem closed in on nearly 14.4%. UnitedHealth, a Dow component and industry barometer, had its best day in a decade. Big Pharma also had a good day, with Pfizer and Johnson & Johnson flying 5%.

“Sanders’ win would be perceived as an increased risk for health insurers since he proposes a free comprehensive national health insurance program for all Americans, potentially leading to the elimination of the existing health insurance system,” said CFRA Research analyst Sel Hardy in a note published Wednesday. “Biden on the other hand, proposes a more moderate change to the private insurance system that will build on the Affordable Care Act, aiming to give more affordable choices on insurance plans, reducing health care costs, and making the health care system less complex.”

On Wednesday, the International Monetary Fund announced that it is proposing $50 billion in emergency funding to combat the coronavirus for low-income and emerging market countries. IMF managing director Kristalina Georgieva said the outbreak was a global problem “calling for a global response.”

The World Health Organization said Tuesday that covid-19, the disease caused by the virus, has killed about 3.4% of those diagnosed with the illness — a higher rate than estimated previously. On Wednesday, the number of new coronavirus deaths reported outside China exceeded those reported inside the country — the center of the outbreak — for the first time.

Markets also were rattled as the yield on 10-year Treasury notes sank to an all-time low Tuesday. Bonds are a safe haven for investors in times of turmoil, and bond yields decrease as bond prices increase. Gold, another safe haven, climbed 2.9% Tuesday and has continued to rise, now trading at $1,647 per ounce.

“The 10-year treasury is a great barometer to measure fear,” Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers, wrote in commentary Wednesday. “With a closing yield Tuesday at an all-time low of less than 1%, markets are reflecting a heightened amount of uncertainty related to the coronavirus and macroeconomic implications.”

European markets mirrored U.S. optimism Wednesday, with the benchmark Stoxx 600 index, Germany’s DAX and France’s CAC 40 all up more than 1.4% in midday trading. Britain’s FTSE 100 climbed 1.6%. Asian markets closed to mixed results, with Hong Kong’s Hang Seng closing down 0.25% and Japan’s Nikkei 225 weakly positive.

Panic around the coronavirus’s presence in the United States has spiked as the death toll reached nine, and new research revealed that the virus had probably been spreading undetected in California and Washington for weeks. Americans are beginning to face disruption to their work and travel, and the list of major events canceled in the face of the outbreak grows by the hour. Many grocery stores and pharmacies report being cleaned out of bottled water, disinfectant products and shelf-stable and frozen foods.

Investors are looking forward to ADP payroll numbers and fresh manufacturing data Tuesday to further suss out the damage the coronavirus has done to the global economy. Analysts are predicting global economic growth could slow to the lowest levels since the financial crisis this quarter.