Stocks bounce back after an early decline

The stock market rebounded Monday afternoon to erase its sharp slide at the opening bell, with investors upbeat after the Federal Reserve announced that it would buy individual corporate bonds.

The rally came after investors expressed initial concern that the coronavirus pandemic could be picking up in numerous states.

The Dow Jones Industrial Average started with a loss of about 500 points, or 2 percent, shortly after it opened. But it had recovered those losses early in the afternoon and, after the Fed’s announcement, closed up 158 points, or 0.6 percent. The Nasdaq closed up 1.4 percent.

The rally was sparked by the Fed’s announcement, in which it said it would “begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers.”

Previously, the central bank had been purchasing only corporate bonds that were part of exchangetraded funds.

Corporate bonds are corporate debt, and the Fed’s decision to pump money into this area is another way for it to help give companies more access to cash. But it could also open the Fed up to criticism that it is playing a role in picking winners and losers in the economy based on which companies it selects and which ones it opts against selecting.

The tech-heavy Nasdaq and the Standard & Poor’s 500 index also jumped on the news after dipping negative in the morning. By 4 p.m., the Nasdaq was up 137 points, or 1.43 percent, and the S&P 500 leveled off at about 25 points, or 0.83 percent.

Shortly after the market opened, the sell-off initially hit travel company stocks hard. But by the afternoon, those stocks had come back.

American Airlines Group initially dropped nearly 5 percent, but it jumped back to less than 1 percentage point in the red by the time the market closed. Norwegian Cruise Line Holdings slid about 8 percent before jumping back; it was down about 2.5 percent by 4 p.m. United Airlines Holdings dropped about 7.2 percent before rising to finish the day down about 1.6 percent.

These companies’ shares have been particularly volatile during the pandemic because many people have hesitated to make travel plans when conditions remain uncertain.

The downturn continued last week’s slide, which was the sharpest drop since mid-March. The decline was prompted by the health and economic crises, despite a hopeful Friday rebound.

“Wall Street’s bumpy road continues as investors continue to grapple with concerns that China is showing signs that a second wave of the pandemic is here and as a spike in new cases in the U.S. could suggest many states could roll back their reopenings,” Edward Moya, an analyst with OANDA, wrote in an email.