Stocks close higher after big decline day before
U.S. stocks shook off an early slide and closed broadly higher Thursday as the market steadied after its worst drop in more than four months.
The S&P 500 rose 1.2%, bouncing back from a drop of 0.3% in the early going. Traders welcomed encouraging data on the pace of layoffs and how powerfully the economy rebounded during the summer from its coronavirus-induced coma.
Economists warn that big challenges still lie ahead, though. The S&P 500 was coming off a 3.5% tumble Wednesday on worries that the worsening pandemic will drag down the economy and corporate profits again.
The S&P 500 rose 39.08 points Thursday to 3,310.11. The gain was less than half of what the benchmark index lost a day earlier. The Dow Jones Industrial Average gained 139.16 points, or 0.5%, to 26,659.11. The index had been down 229 points and as high as 371 points.
The tech-heavy Nasdaq composite fared better than the rest of the market. It climbed 180.72 points, or 1.6%, to 11,185.59.
The yield on the 10-year Treasury rose to 0.83% from 0.79% late Wednesday.
A strong rebound in technology sector stocks helped power the rally ahead of widely anticipated quarterly report cards from Facebook, Amazon and Google’s parent company. The three big tech companies each reported results after the close of regular trading that topped Wall Street’s expectations.
“If you look at the leadership today, it’s back to the mega-cap names,” said Willie Delwiche, an investment strategist at Baird. “It’s in anticipation of good earnings this evening when you have a whole swath of companies reporting.”
The major stock indexes are still on track to post weekly losses, including the second straight weekly decline for the S&P 500.
Across the Atlantic, European stocks initially rose but leveled off after the head of the
European Central Bank said there’s “little doubt” it will deliver more stimulus in December. They were also recovering from a sharp slide Wednesday.
Despite the relatively calm moves, caution continues to hang over the market. A measure of investors’ fear in the U.S. stock market touched its highest level since June before receding Thursday, and oil prices continued their sharp descent on worries about demand from a virusweakened economy.
Beyond Europe, coronavirus cases are also on the rise in the United States, raising worries about restrictions on businesses returning. Even if the sweeping lockdowns that suffocated the economy earlier this year don’t come back, the fear is that the worsening pandemic could nevertheless keep customers away from businesses and undercut their profits.
“The future still looks cloudy,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “What happens with the virus will definitely determine consumers’ behavior.”
The economy had been making strides in the summer, and it grew at a record annual rate of 33.1% from July through September, according to a government estimate released Thursday. That followed up on its crash from April through June, when it shrank at an annualized rate of 31.4%.
More recently, the number of U.S. workers applying for unemployment benefits eased last week to 751,000. While that’s still high compared with before covid-19, it’s not as bad as the 791,000 from the previous week. It was also better than economists had forecast.
“We need to keep pricing on the front end, not the back end.” —Seema Verma, head of the Centers for Medicare and Medicaid Services