Futures contracts tied to the major U.S. stock indexes surged in early trading Tuesday on hopes an agreement on a stimulus bill to rescue the economy from the coronavirus was close.
As of 7:34 a.m ET., Dow Jones Industrial Average futures jumped 930 points, or 5%, to hit so-called limit up levels. S&P 500 futures and Nasdaq futures were also up 5% and “limit up.” The S&P 500 SPDR ETF was up 4.7% in premarket trading.
Senator Charles Schumer and Treasury Secretary Mnuchin were close to a deal on a $2 trillion stimulus bill, according to reports, which cited a conference call Schumer had Monday evening with Democratic leaders. Negotiations on the bill were set to continue Tuesday morning.
The futures contracts cannot trade once they exceed certain extreme bands, according to rules of the exchange to curb volatility. No activity can take place outside of those bands, in this case, up 5%. During this historic market plunge this month, the futures have often been halted for being “limit down,” off by more than 5%
Tuesday’s moves followed yet another stormy day on Monday as investors swung back to pessimism and pushed the major indexes to new multiyear lows as a procedural vote in the Senate on a bill failed for the second time in 24 hours.
The Dow dropped 582.05 points, or 3%, to a new three-year low on Monday and remained on pace to clinch its worst calendar month since 1931. The S&P 500 dropped 2.9% to 2,237 and closed 34% below a record set last month as both indexes sank further into bear markets amid the COVID-19 outbreak.