TSX moves higher on Friday as stock market roller-coaster continues

The unprecedented volatility on the stock market continued on Friday as the benchmark index of the Toronto Stock Exchange moved into positive territory a day after its worst loss ever.

Thursday was the worst day for the TSX in decades, as the benchmark index lost 12 per cent of its value. Fears of the coronavirus prompted the sell-off, but on Friday buyers seemed to be thinking the market may have overreacted.

Prior to the market opening, the futures market was so strong that the market was temporarily shut down to restore order. 

When that shutdown was lifted, the TSX in Canada, and the S&P 500, the Dow Jones and the Nasdaq in the U.S. were all up by between five and six per cent.

Investors can't seem to shake the fear and uncertainty over what the coronavirus will do to the North American economy, as the number of cases of the virus that causes COVID-19 escalates rapidly. 

The Canadian government recommended that citizens cancel all non-essential travel outside the country on Friday. Ottawa also unveiled a stimulus package for the Canadian economy later in the afternoon.

The stock market gains were a relief to investors who have seen several years worth of returns on the TSX wiped out in a matter of days.

"Recall that the index was at an all-time high as recently as three weeks ago to the day," BMO economist Doug Porter said. "Markets have already built in a very severe blow to the economy."

Investment portfolios have been hit by a blow that's almost as severe. It was been an eye-watering week for investors who have taken the conventional wisdom of financial advisers — buy stocks and hold them for the long haul.

At its closing price of 12,508 on Thursday, the TSX was at the same place it was at back in 2016. In fact, going back even further, the TSX is at the same level it was in late 2006 — meaning if you don't count dividends, this selloff has wiped out more than 14 years' worth of capital gains.

Governments are rushing to try to show investors that they stand ready to inject the economy with stimulus to keep the economy running.

"What we're headed for is a market that should begin to settle down [with] investors now expecting the government to get the economic plan in place and get it into law," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

But ultimately, no matter what weapons governments try to target the problem, uncertainty on markets is likely to continue until the virus itself shows signs of slowing down.

"We expect volatility to persist until there are signs that the outbreak is easing," Scotia Wealth Management said in a report to clients on Friday. "We are not there yet as the number of new cases ... continues to increase."