Stocks – Wall Street Rallies, but Trading Remains Volatile

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By Kim Khan – The major stock indexes rose to the highs of the day Monday, but trading was volatile as investors weighed hopes of monetary easing and liquidity from central banks against further economic impact from Covid-19.

The climbed 550 points, or 2.2%. The rose 1.9% and the gained 1.9%.

Sentiment was buoyed by global central bank action and other possible government moves to stabilize markets. The Group of Seven finance ministers plan to hold a teleconference to discuss action to address the novel coronavirus, Bloomberg reported citing people familiar with the matter.

In addition, President Donald Trump called on the Federal Reserve to move faster with rate cuts and also told reporters he had directed drug companies to speed up work on a vaccine for Covid-19.

But stocks whipsawed through the trading session, with the S&P twice dipping into the red in late-morning trading.

And investors may have to get used to sharp jumps and falls in the near term.

Making a call on the market “is now is highly differentiated … depending on the type of investor, the ability to withstand considerable volatility, the time horizon and initial portfolio conditions,” Allianz (DE:) Chief Economic Adviser Mohamed El-Erian tweeted.

“And this for a simple reason: on fundamentals, markets are likely to overestimate the impact of the initial policy response despite even … poorer economic and corporate fundamentals; valuations are less elevated; and, on technicals, the initial washout has dampened the (buy-the-dip, fear-of-missing-out) conditioning and taken some of the fluff out,” El-Erian said.

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