Dow rebounds more than 11% in best day since 1933 as Congress nears coronavirus stimulus deal

Barry Sternlicht on coronavirus: We cannot kill the largest economy in the world
Barry Sternlicht on coronavirus: We cannot kill the largest economy in the world

The Dow Jones Industrial Average soared on Tuesday, logging its best day in 87 years as investors bet U.S. lawmakers would deliver soon a stimulus bill to rescue the economy from the damage caused by the coronavirus and shutdowns designed to stop its spread. It was a historic bounce coming amid a historic sell-off.

The 30-stock average closed 2,112.98 points higher — or more than 11% — at 20,704.91, notching its biggest one-day percentage gain since 1933. The S&P 500 rallied 9.4% to 2,447.33 for its best day since October 2008. The Nasdaq Composite surged 8.1% to 7,417.86, its best day since March 13. Both the Dow and S&P 500 rebound off their lowest levels since late 2016.

It was the Dow's fifth-best day ever.

A deal was expected to be reached at some point Tuesday after failed negotiations over the last two days that sent the market on a wild trip. House Speaker Nancy Pelosi told CNBC's Jim Cramer there is "real optimism" in Congress over a stimulus deal being reached. "We think the bill has moved sufficiently to the side of workers," she 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.

'Glimmers of hope'

Chevron gained more than 22% to lead the Dow higher after the CEO said the energy giant would not cut its dividend. American Express and Boeing also rallied more than 20%. Energy was the best-performing sector in the S&P 500, soaring 16.3%, while industrials and financials each jumped more than 12%.

The market breadth was overwhelmingly on the positive side in a good sign this comeback could have legs. Advancers led decliners on the New York Stock Exchange by 12 to 1. Tuesday's surge 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 stimulus bill failed for the second time in 24 hours.

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

The market came into Tuesday extremely "oversold" and due for a pop, according to traders. The Dow dropped 582.05 points, or 3%, to a new three-year low on Monday and was 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. After Tuesday's gain, the S&P 500 cut its loss for March to 17%, still its worst month since 1987.

Norwegian jumps 42%

Stocks hardest hit by the shutdowns resulting from the coronavirus led the gains Tuesday. Shares of Wynn and MGM Resorts both surged more than 15%. Delta Air Lines jumped more than 21%. General Motors shares, meanwhile, climbed nearly 20% after the automaker announced it will draw about $16 billion from its credit facilities to mitigate the coronavirus' impact. 

Norwegian Cruise Line's stock jumped 42% on Tuesday alone, for the biggest gain in the S&P 500. Though shares of the cruise line hit with cancellations from the coronavirus are still down 76% on the year. 

The Cboe Volatility Index (VIX) — Wall Street's preferred fear gauge — dipped 0.67 points, or 1.2%, to 60.85. Last week, the VIX eclipsed its financial crisis high, closing at 82.69.

Tuesday's gains also came as President Donald Trump signaled he was eager to reopen the economy, despite concerns of public health officials. "We're opening up this incredible country. Because we have to do that. I would love to have it open by Easter," Trump said on Tuesday. 

To be sure, some strategists on Wall Street were skeptical about Tuesday's jump. Nikolaos Panigirtzoglou, a managing director at JPMorgan, noted there could be "considerable short covering from here," which would temporarily lift equity prices.

Coronavirus news still grim

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."

However the news on the cause of this historic market sell-off was still grim on Tuesday.

More than 400,000 cases have been confirmed worldwide, including over 50,000 in the U.S., according to Johns Hopkins University. So far, more than 600 deaths related to the coronavirus have been confirmed in the U.S. 

New York City reported nearly 15,000 coronavirus  cases Tuesday and 131 related deaths.

Some of the biggest rallies throughout history have come during bear markets. And some investors believe coronavirus cases in the U.S. must show signs of peaking before any comeback could be trusted.

But the sheer magnitude of the gains on Tuesday were hard to ignore. It was the largest point gain for the Dow ever. It was the second-biggest point gain for the S&P 500 in its history.

—CNBC's Eustance Huang contributed to this report.

Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.