Stocks rise in volatile trading after Fed slashes rates to combat coronavirus

Stocks rose in volatile trading on Tuesday after the Federal Reserve slashed interest rates by half a percentage point in an emergency effort to stem slower economic growth from the coronavirus outbreak. 

The decision came two weeks before the Fed’s scheduled meeting as the central bank felt it was necessary to act quickly to combat the effect of the virus spreading worldwide. It’s the first such emergency action coming in between scheduled meetings since the financial crisis. The Fed has scheduled a news conference at 11 a.m.

The Dow Jones Industrial Average traded 114 points higher, or 0.5%, after dropping more than 300 points earlier in the day. The 30-stock average gyrated between sharp gains and solid losses shortly after the decision was announced. The S&P 500 and Nasdaq Composite were both up at least 0.2%.

Amazon shares traded 1.2% higher while Netflix gained 0.9%. Apple shares were up 0.4% after dropping more than 1% earlier on Tuesday. Bank shares fell broadly, led by a 3% drop in Bank of America shares. JPMorgan Chase and Citigroup slid 2.5% and 0.4%, respectively. 

“The worse the economic situation gets, the more likely there will be massive coordinated monetary and fiscal stimulus to offset the weakness,” Tony Dwyer, chief U.S. equity strategist at Canaccord Genuity, said in a note. “There is no way to judge the global economic and EPS impact of the COVID-19 virus as cases globally are still ramping.”

Tuesday’s moves follow a roaring comeback rally in the previous session that saw the Dow post its biggest percentage gain since March 2009. The index also recorded its largest-ever point surge on Monday.

Monday saw U.S. stocks snap a losing streak that had gone on for over a week.  Some investors were skeptical that the rally has legs without a significant central bank response. Even if that comes to fruition, investors have their doubts the market has seen the end of its tumultuous trading of the last six days.

Jeff Mills, the chief investment officer at Bryn Mawr Trust, said Monday on “Power Lunch” that he was not advising clients to buy back into the market and that Monday’s rally was just a “technical snapback.”

“I think the spectrum of outcomes is so wide here that one trading day is not going to resolve all of our issues, so we’re telling our clients just to sit tight for now,” Mills said.  

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