US markets have not witnessed a sustained surge following the passage of the largest stimulus package in American history. The reaction on Wednesday has been unsteady.
At the start of trading the Dow Jones Industrial Average surged more than 700 points to 21,450. Yet within 45 minutes the index had plunged, wiping out these initial gains and actually standing down at 20,571. The country’s other leading indices followed a similar trajectory.
The Dow Jones and S&P 500 had both bounced back to stand up 1.56 and 0.17 per cent respectively by mid-morning trading (EST), while the Nasdaq’s losses were limited to 0.63 per cent.
With such minor movements after a $2 trillion stimulus package, market uncertainty in the world's largest economy remains high.
Indeed Wednesday’s trading may show that the Covid-19 crisis has revealed the underlying fragility of the US financial system, as commentators have suggested.
These observers have noted that as governments and central banks undertake unprecedented measures to counter the economic effect of the coronavirus pandemic, these measures appear less and less effective.
The Federal Reserve, for example, has cut rates to zero, launched QE infinity, strengthened cooperation with other central banks and entered the corporate bond market. Yet it still faces a dollar (USD) shortage and a severe depression in the first half of 2020.
Others might argue that US markets had already experienced their stimulus surge the day before the package was actually passed. On Tuesday (March 24) the Dow experienced its best day in 87 years.