NEW YORK (Reuters) – Those pining for a bottom to the gut-wrenching stock market selloff may be disappointed to learn that mega one-day rallies like the historic one witnessed on Tuesday are typically not the start of a durable recovery.
U.S. stocks, that recently entered a bear market – a fall of 20% or more from recent highs – rebounded strongly on Tuesday after U.S. lawmakers said they were close to a deal for an economic rescue package in response to the coronavirus outbreak, injecting optimism to a market grappling with its biggest selloff since the financial crisis.
The Dow Jones Industrial Average .DJI soared 11.37%, its largest one-day percentage gain since 1933, while the S&P 500 .SPX jumped 9.38% to 2,447.33, its biggest one-day percentage rise since 2008.
All the same, data suggest investors should treat the rally in stocks with caution.
Of the twenty past instances when the S&P rallied 8% or more on a single day, thirteen of them took place when stocks were in the embrace of a bear market.
