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Dow Rebounds to Close Up Nearly 1,300 Points, or 5%, on Hopes for Central Bank Support

The Dow finishes up nearly 1,300 points, or more than 5%, as investors looked to central bank support following last week's market meltdown.
  1. Stocks finished solidly higher Monday as investors looked to central bank support amid last week's market meltdown.
  2. Coronavirus update: In China, where the coronavirus outbreak began, 2,912 deaths have been reported with 80,026 confirmed cases. Globally, there have been 3,048 deaths and 89,254 cases.
  3. General Electric is Real Money's Stock of the Day after J.P. Morgan analyst Stephen Tusa boosted his price target on shares of the industrial giant.

Stocks finished sharply higher Monday as investors looked to central bank support amid the $6 trillion global market meltdown and a sharply slowing world economy caused largely by the spreading coronavirus outbreak.

The Dow Jones Industrial Average finished up 1,293 points, or 5%, to 26,703, the S&P 500 rose 4.6% and the Nasdaq gained 4.49%.

Leading the Dow higher were Walmart (WMT) - Get Walmart Inc. Report, Apple  (AAPL) - Get Apple Inc. Report, and UnitedHealth (UNH) - Get UnitedHealth Group Incorporated (DE) Report.

The ISM Manufacturing Index in the U.S. fell to 50.1 in February from 50.9. Economists were expecting an index reading of 50.5.

"This looks OK but it won’t last. Most responses likely were received before the Covid-19 outbreak became the all-consuming story, so it’s already out of date," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. 

"We expect much weaker manufacturing numbers over the next couple of months, starting with the first regional March surveys in a couple weeks’ time."

Manufacturing in China, the world's second-largest economy, tumbled to record lows according to data released over the weekend. Businesses remained closed and workers were encouraged to stay home as coronavirus infections surged.

With factories in Asia sputtering because of supply-chain disruptions, the Bank of Japan issued a statement saying it “will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.”

The statement followed similar comments on Friday from Federal Reserve Chairman Jerome Powell, who pledged that the central bank would "act as appropriate" given that "the coronavirus poses evolving risks to economic activity."

"The Federal Reserve is closely monitoring developments and their implications for the economic outlook," a statement added. "We will use our tools and act as appropriate to support the economy."

Goldman Sachs analysts said the comments could signal a rate cut of 50 basis points from the Fed, even before its March 17-18 meeting. Economists at the bank warned that "recession risk is real, even if it is not our base-case scenario," as U.S. cases of the virus rose and reports said five people in the country have died.

The Organization for Economic Cooperation and Development said Monday that the global economy will slow sharply this year, growing 2.4% in its best-case scenario, down from the 2.9% expansion projected before the outbreak.

"With the virus disrupting global supply chains and reducing growth forecasts across the board, a return to stagflation is a possibility," said Nancy Davis, portfolio manager of the  (IVOL) - Get Quadratic Interest Rate Volatility & Inflation Hedge ETF Report exchange-traded fund and chief investment officer of Quadratic Capital. 

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"Stagflation is disastrous news for investors with rising consumer prices and sluggish economic growth. The supply-chain disruptions from the coronavirus could cause both. Investors should not dismiss stagflation as some antiquated relic of the 1970s."

Stocks fell for a seventh day on Friday and the S&P 500 suffered its worst week since the 2008 financial crisis, falling 11.5%. The Dow sank 12.4% as investors braced for a potential coronavirus pandemic and the pain it could inflict on global economic growth. The Nasdaq dived 10.5%.

In China, where the coronavirus outbreak began in December, 2,912 deaths have been reported with 80,026 confirmed cases. Globally - the virus can now be found in more than 60 countries - there have been 3,048 deaths and 89,254 cases.

In politics, Minnesota Sen. Amy Klobuchar on Monday ended her campaign for the Democratic Party nomination for president, following by one day a similar decision from Pete Buttigieg.

Reports say that both Klobuchar and Buttigieg tonight will appear with and endorse Joe Biden at a rally in Dallas.

The exits leave Biden, business executive and former New York City Mayor Michael Bloomberg, Hawaii Rep. Tulsi Gabbard, Vermont Sen. Bernie Sanders and Massachusetts Sen. Elizabeth Warren in the race for the Democratic nomination.

Tomorrow is Super Tuesday, when primaries in 14 states and American Samoa will allocate fully a third of the pledged delegates to the remaining Democratic Party candidates.

General Electric  (GE) - Get General Electric Company Report rose Monday after a longtime critic of the company's prospects boosted his price target on shares of the improving industrial giant.

"We were wrong," J.P. Morgan analyst Stephen Tusa said of the bank's previous call on the stock, which was made in April 2019.

He raised his target price by $3 to $8 a share, and boosted his rating to neutral from underweight amid a six-month rally in the stock that has added more than 30% to the company's market value.

"We are upgrading GE as the spread between our free-cash-flow estimate and consensus is narrower after a better-than-expected 2019, helped by less derisking at GE Capital Services than we had thought around which it would take a recession to influence (which) is not our base case," Tusa wrote.

Activist hedge fund Elliott Management has nominated four directors to the board at Twitter  (TWTR) - Get Twitter Inc. Report and is seeking to replace Jack Dorsey, CEO of the social media company.

The stock rose more than 8% on Monday after reports said Elliott has taken a roughly $1 billion stake in Twitter and has been in talks with management about its desire for the company to find a full-time CEO. Dorsey also runs payments company Square  (SQ) - Get Block Inc. Class A Report.

Apple finished up 9.2% Monday after analysts at Oppenheimer boosted their rating on the tech giant's stock to outperform while hiking their price target to $320 a share.

Apple is well-positioned to weather both the disruptions to the company's supply chain in China as the coronavirus takes a toll, and rising competition as well, according to a research note from Oppenheimer.