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U.S. stock indexes have clawed back losses but are still set to close out March with one of the worst quarterly performances ever as evidence grows of the large-scale damage to business activity from the global spread of coronavirus.

A huge three-day rebound last week and a surge Monday came as fund managers assess how and when to rebalance portfolios for the end of what appears to be the S&P 500’s worst first quarter performance since 1938, and worst overall quarterly percentage drop since the financial crisis. The Dow is on track for its biggest quarterly decline since 1988.

Many portfolio managers were effectively forced into selling treasuries and buying equities that had fallen in price during the month, said Michael Lorizio, senior fixed income trader at Manulife Investment Management.

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A test will come on Wednesday as that pressure to take on risk eases, he said. “When we get past the month-end we will be seeing how well the market functions,” Lorizio said.

The dollar on Tuesday benefited in choppy trade from quarterly and fiscal year-end demand from portfolio managers and Japanese firms.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“It’s the last day of the quarter, and it’s been a quarter to forget, a horrible quarter.”

“It’s a last minute adjustment. We’re in a for a volatile session. There is a good chance that the lower open can reverse during the course of the day because bargain hunting is now coming into the picture, that is part of the last minute window dressing.”

“In fact, I see defensives are being bid up and that could be a good indication of what portfolio managers are looking at.”

MICHAEL JAMES, MANAGING DIRECTOR OF EQUITY TRADING, WEDBUSH SECURITIES, LOS ANGELES

“As far as the recent trend that we’re seeing, it’s been pretty difficult outside of last week’s three-day gain to be able to put anything positive back-to-back.”

“There still remains a significant amount of uncertainty in the macro environment and I expect the market’s going to remain choppy until there’s more clarity about getting to the other side of the COVID-19 situation.”

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“Expectation needs to be kept in check for any material upside in the market in the short-term.”

“It’s pretty hard to predict what the direction is going to be. The only thing that’s likely to be the case is higher volumes because it’s month-end, quarter-end today.”

“I don’t think anyone should be surprised by significant dislocation moves in both directions. While majority of people want to remain optimistic, now that we’ve seen the lows and there’s a much higher direction to come over the next few months to the upside rather than the downside, that optimism is merely based on a lot of hope.”

“And hope is usually not an investment strategy.”

JACK JANASIEWICZ, PORTFOLIO STRATEGIST, NATIXIS INVESTMENT MANAGERS SOLUTIONS, MASSACHUSETTS

“Some of (the recent gains) has to be due to do with rebalancing for quarter-end and month-end. Once we get through the next couple of days, it’s going to be a little bit more interesting because the question then becomes ‘do we really return back to fundamentals and technicals?’.”

“Some of the technical support we’ve seen is not going to be there and that’ll be a better understanding of how the market is looking at the risk backdrop going forward.”

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PHIL BLANCATO, CEO, LADENBURG THALMANN ASSET MANAGEMENT, NEW YORK

“I know there has been some noise about that. Every asset manager is going to look at the situation and say ‘why would I want to go back to a full-on overweight, or even neutral weight, equity position here?’ There are so many unknowns about the marketplace that still needs to come out.”

“I would argue the reason why you are seeing some of this is certainly every day the 401k markets pumps some money into the market and that is already a natural flow of money that comes in. But beyond that, some rebalancing of asset managers like me because it is quarter-end or just the indexes, I don’t think it’s going to have that much of a profound impact because there are still plenty of bears out there. So I’m not buying that yet. This is simply trading on better news than what we have seen.”

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