Fed’s efforts squash recession fears on Wall Street

It took just a few hours Monday for fear to turn back into greed on Wall Street, and stocks erased a sharp, early slump to notch healthy gains after the Federal Reserve unveiled its latest push to prop up the economy.

The S&P 500 climbed 0.8% following the latest day of big swings in global markets, as a remarkable, weekslong rally shows some cracks. Worries are rising that additional waves of coronavirus infections could derail the swift economic recovery that Wall Street had seemed so sure was on the way just a week ago.

When trading began in New York, those worries seemed set to drag the U.S. stock market to a loss following sharp declines in Asia and more modest ones in Europe. The S&P 500 quickly fell 2.5%, with stocks that most desperately need the economy to reopen hit particularly hard.

But stocks and Treasury yields began to trim their losses as the day progressed. They popped decisively higher after the Fed said in the afternoon that it will buy individual corporate bonds. The purchases will be part of its previously announced program to keep lending markets running smoothly, which allows big employers to get access to cash.

They’re also the latest reminder that the Fed is doing everything it can to help support markets, analysts said. Central banks have repeatedly come to the economy’s rescue over the years, and it was huge, unprecedented moves by the Fed earlier this year that helped put a halt to the S&P 500’s nearly 34% sell-off on worries about the recession coming out of the coronavirus pandemic.

The S&P 500 rose 25.28 points to finish at 3,066.59, which is 9.4% below its record set in February.

The Dow Jones Industrial Average gained 157.62 points, or 0.6%, to finish at 25,763.16 after earlier being down as many as 762 points. The Nasdaq composite added 137.21, or 1.4%, to 9,726.02.