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Wall Street set to bounce from three-year lows

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(Reuters) - Wall Street was set to bounce from three-year lows on Tuesday, as signs of Washington nearing a deal on a $2 trillion economic rescue package gave a shot of optimism to markets reeling under the biggest selloff since the global financial crisis.

The S&P 500 .SPX and Dow Jones .DJI indexes closed about 3% lower on Monday on fears of deep and lasting recession as entire nations shut down to curb the coronavirus pandemic.

The severity of the spread of COVID-19 and the expectations of aggressive stimulus measures have been mirrored in financial markets with the S&P 500 gaining more than 9% in one session only to plunge 12% the following day.

The benchmark index has lost $10 trillion in value since a record high last month.

Hopes are now running high of the U.S. Senate passing the stimulus bill, which is expected to provide financial aid to Americans out of work because of the virus and help distressed industries.

“Fiscal stimulus is absolutely necessary because it directly effects the consumer and consumer spending and consumer confidence is what’s driving the U.S. economy,” said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.

A separate proposal from Democrats in the U.S. House of Representatives to grant airlines and contractors a $40 billion bailout helped lift shares of American Airlines (AAL.O), Delta Airlines (DAL.N) and United Airlines (UAL.O) by about 10% in premarket trading.

Boeing (BA.N) rose over 11% and was the top gainer among Dow components.

While the rescue package and the Fed’s historic boost will ease some pain in financial markets, traders remained doubtful of a long-lasting recovery without evidence of a peaking in the number of new COVID-19 cases.

“It appears that governments are able and, in some cases, willing to do whatever it takes to try and lessen the impact from what will undoubtedly be a severe economic shock,” said Andy Scott, associate director at Chatham Financial in London.

“What we don’t know at this stage is how long it will take to contain the virus that is still spreading exponentially, and what kind of damage that will do to both populations and economies across the globe.”

With much of the economic blow sliding into the second quarter, investors have shrugged off latest figures showing sharp declines in business activity around the globe.

U.S. surveys of manufacturing and services sector activity, due later in the day, are also likely to show a similar plunge.

At 08:20 a.m. EDT, Dow e-minis 1YMcv1 were up 723 points, or 3.91%, S&P 500 e-minis EScv1 were up 87.75 points, or 3.95% and Nasdaq 100 e-minis NQcv1 were up 269 points, or 3.85%.

(This story removes extraneous word in paragraph 2)

Reporting by Uday Sampath and Medha Singh in Bengaluru; Editing by Sagarika Jaisinghani and Arun Koyyur

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