The Dow and the broader US stock market are rallying Monday, as stocks rebound from last week’s sharp selloff over the potential fallout from the global coronavirus outbreak.
An onslaught of quarantine measures and travel restrictions imposed by companies and governments 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 yet 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 climbed as many as 374 points Monday, retracing some of its losses from last week. The index had finished more than 600 points lower on Friday. By midday, the Dow was up 300 points, or 1.1%.
The S&P 500 also rose 1.1%, while the Nasdaq Composite climbed 1.4%.
“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.
Elsewhere, traditional safe haven assets like gold and US Treasury bonds are down as stocks rebound and demand for safety bets wanes.
