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US stocks suffer late sell-off as stimulus passes into law

US stocks suffer late sell-off as stimulus passes into law

US stocks snapped a three-day winning streak on Friday as investors refocused on the wide economic fallout from the coronavirus pandemic while President Donald Trump prepared to sign a historic US stimulus bill into law, reported the Financial Times.

The benchmark S&P 500 index ended the day down 3.4 per cent after a sell-off that accelerated into the close, reversing some of the gains from its strongest three-day rally since the 1930s. The Dow Jones Industrial Average fared worse, dropping 4.1 per cent.

Investors instead piled into safe-haven assets, with the benchmark 10-year US Treasury yield falling 0.16 percentage points to 0.68 per cent. The yields on many Treasury bills, which mature in one year or less, remained well below zero.

“The demand for cash is still high,” said Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle. “There will still be tremendous volatility given that large parts of the economy will be closed for an extended period of time.”

For the week as a whole, the S&P 500 was up 10.3 per cent. It remains 24.9 per cent below its peak on February 19.

In recent days, investors had signalled relief that US legislators were able to push through a massive rescue package, but now there are concerns about how quickly that aid will be distributed and if it will be sufficient to ward off the worst of the economic fallout from the coronavirus outbreak.

“There is no doubt the market loved the $2tn stimulus package, but now the rubber needs to actually meet the road,” said David Lafferty, chief market strategist at Natixis Investment Managers. “Getting this money into the hands of large firms . . . and into the hands of consumers isn’t as operationally easy as it sounds.”

Strategists said there could be more pain to come following a violent sell-off over the past few weeks that prompted big investors to liquidate riskier holdings — especially now that the economic cost of the coronavirus pandemic is starting to become apparent.

The US, which overtook China this week to become the country with the highest number of infections, said on Thursday that jobless claims surged to a record 3.3m in the week ending March 21.