Shares on Wall Street ended near Friday's lows and the dollar fell further after the U.S. House of Representatives, as expected, approved a $2.2 trillion stimulus package, the largest in U.S. history. After the markets closed, President Donald Trump signed the bill into law.
The dollar's slump was seen partly as a sign that central bankers have been successful in easing stress in the money markets.
Market volatility is expected to persist as the coronavirus pandemic that triggered closures in economies worldwide remains very much a threat.
The United States surpassed two grim milestones as virus-related deaths soared past 1,200 and it became the world leader in confirmed cases. Worldwide, confirmed cases rose above 551,000 with nearly 25,000 deaths.
The stimulus "is not necessarily enough to make people say, 'I've got to run out and buy stocks,'" said Rick Meckler, a partner at Cherry Lane Investments in New Jersey. "That's going to take more time."
Uncertainty over the overall human and economic toll was reflected in financial markets. MSCI's gauge of global stocks rallied by the most in any week since December 2008, but is also poised for its largest month- and quarter- drops since 2008, during the height of the financial crisis.
Nervous investors supported demand for gold, whose prices jumped by the most in any week since 2008 despite a Friday decline.
The coronavirus infection rate is driving much of the market at a time of great uncertainty, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.
"My big hang-up here is when the curve does start to flatten, that doesn't mean we can return to normal human and economic behavior," he said.
"If we do return to normal human and economic behavior, we risk the chance the curve goes parabolic again. Just from the perspective of how long this potentially can last, there's still a great deal of uncertainty."
The Dow Jones Industrial Average fell 915.39 points, or 4.06%, to 21,636.78, the S&P 500 lost 88.6 points, or 3.37%, to 2,541.47 and the Nasdaq Composite dropped 295.16 points, or 3.79%, to 7,502.38.
The pan-European STOXX 600 index lost 3.26%, and MSCI's gauge of stocks across the globe shed 2.39%. Emerging market stocks lost 1.03%.
Stock markets have rallied over the past week on trillions of dollars of economic stimulus enacted or pledged by policymakers worldwide, from central banks to governments. More may be needed as the virus slams the brakes on economic activity and increases healthcare spending.
"Next week, markets will likely continue to focus on the spread of COVID-19 - whether European cases are reaching a peak, how much of the U.S. will be put in lockdown, and whether China can avoid a second wave," said Gaétan Peroux, strategist at UBS Global Wealth Management.
The $2.2 trillion stimulus package signed by Trump will flood the world's largest economy with money to stem the economic damage from the pandemic.
Amid the avalanche of stimulus, the U.S. dollar extended its daily decline and posted its biggest weekly decline since early 2009. The dollar index fell 0.937% on Friday.
The euro was up 0.97% to $1.1135, the Japanese yen strengthened 1.49% versus the greenback at 108.00 per dollar, while sterling was last trading at $1.2447, up 2.02% on the day.
The U.S. currency's fall after two weeks of steep gains suggests the Federal Reserve's efforts to relieve a crunch in the dollar-funding market are working, some analysts said.
"What we are seeing is abating stress in the money markets. Action by central banks has been successful so far and a shortage of dollars has been taken off the table," said Ulrich Leuchtmann, head of FX and EM research at Commerzbank.
U.S. Treasury yields posted a weekly decline, ending Friday near the day's lows.
Benchmark 10-year notes last rose 1-9/32 in price to yield 0.6778%, from 0.808% late on Thursday. The 30-year bond last rose 3-24/32 in price to yield 1.2555%, from 1.395%.
Oil prices extended their fall on demand concerns as the virus slowed economies to a crawl, which outweighed the stimulus efforts. U.S. crude recently fell 3.98% to $21.70 per barrel and Brent was recently at $24.83, down 5.73% on the day.
Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.
Spot gold dropped 1.0% to $1,613.02 an ounce. The metal posted its largest weekly advance since 2008.
(Reporting by Rodrigo Campos; Additional reporting by Sujata Rao and Ritvik Carvalho in London, Karen Brettell, Herbert Lash, and Kate Duguid in New York, and Uday Sampath Kumar and Medha Singh in Bengaluru; Editing by Dan Grebler, Leslie Adler and Richard Chang)
By Rodrigo Campos and Koh Gui Qing