By Karen Langley, Avantika Chilkoti and Chong Koh Ping
The Dow Jones Industrial Average posted its biggest weekly gain since 1938, paring some of the losses of recent weeks, as lawmakers agreed to the largest economic-relief package in U.S. history in response to the coronavirus pandemic.
Investors have been on a roller-coaster ride as attempts to curb the coronavirus pandemic constrain economic activity and policy makers work to cushion the blow. Major U.S. stock indexes posted double-digit gains for the week -- with the Dow surging 13% and the S&P 500 climbing 10% -- but remain down more than 20% in 2020.
After a furious three-day rally earlier in the week, stocks pulled back Friday. The blue-chip index fell 915.39 points, or 4.1%, to 21636.78. The S&P 500 dropped 3.4%, and the Nasdaq Composite declined 3.8%.
Investors looking for government spending measures to soften the economic damage watched throughout the week as legislators agreed to and passed a $2 trillion stimulus package. The legislation, which President Trump signed Friday, is the largest economic-relief package in U.S. history and would extend aid to many Americans through direct payments and expanded unemployment insurance. A record 3.28 million U.S. workers applied for unemployment benefits last week, nearly five times the previous record high.
Earlier in the week, the Federal Reserve signaled a wide-ranging effort to help the U.S. economy by extending loans and purchasing hundreds of billions of dollars in government debt.
"The one-two punch is important," said Mike Wilson, chief U.S. equity strategist and chief investment officer for Morgan Stanley. "What the market is saying is earnings are going to be really bad in the near term, economic growth is going to be really bad in the near term, but with this kind of a stimulus I can see that a recovery will happen at some point later this year potentially."
Despite the week's gains for stocks, there were signs that investors remain cautious. Gold, a traditional haven, posted its largest one-week percentage gain since September 2008. The yield on the benchmark 10-year U.S. Treasury fell for a second consecutive week, dropping 0.188 percentage points to 0.744%.
The Cboe Volatility Index, a closely watched measure of turbulence in U.S. stocks, finished the week lower after rising for five consecutive weeks, its longest such streak since December 2012. Many investors expect the recent market volatility to persist.
"I think this will continue for some time," said Nancy Tengler, chief investment officer at Laffer Tengler Investments. "The news is going to be spotty and investors have been scrambling."
The U.S. overtook China this week as the country with the most coronavirus cases. As of Friday, the U.S. had more than 97,000 confirmed cases, according to data from Johns Hopkins University. Hospitals in the New York metro area and Seattle have been overwhelmed despite stringent measures to curtail the contagion.
Adding to concerns about how long the pandemic may damp economic activity, China said Thursday it would close its borders to nearly all foreigners and drastically slash international flights in a bid to curb the reintroduction of the virus from abroad.
"Underlying all this is how do we get this virus under control," said Neil Hennessy, chief investment officer of Hennessy Funds. "Once we have it under control or it peaks, subsides, whatever, then the market will be back on its legs."
Investors and business leaders remain concerned that emergency measures by the Federal Reserve and U.S. lawmakers, including the stimulus package, may not prevent a sharp U.S. recession that could have global consequences.
"What we're trying to do is put the economy on ice and sow the seeds of a strong rebound as soon as the crisis is over, recouping as much economic ground as possible," said Richard McGuire, head of rates strategy at Rabobank. "It's a volatile environment where we will, within that context, see repeated bold policy responses, but they are pushing on an open door."
Oil prices declined after the U.S. Department of Energy suspended the purchase of 30 million barrels of crude oil it was going to add to its Strategic Petroleum Reserve. The meeting of G-20 leaders also disappointed some traders after it failed to produce any statement that related to oil or the price war raging between Saudi Arabia and Russia. U.S. crude declined for a fifth consecutive week, losing 4.9% for the week to $21.51 a barrel.
Overseas, the Stoxx Europe 600 index rose 6.1% for the week, snapping a five-week losing streak. Japan's Nikkei 225 climbed 17% for the week.
Write to Karen Langley at firstname.lastname@example.org, Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Chong Koh Ping at email@example.com