Fed to buy more bonds; stocks rally
Stocks on Wall Street rallied back from a sharp, early slump Monday, ending the day with modest gains after the Federal Reserve unveiled its latest push to prop up the economy.
The Standard & Poor’s 500 climbed 0.8% in the latest day of big swings for global markets as a remarkable, weeks-long rally shows some cracks.
Worries are rising that additional waves of coronavirus infections could derail the swift economic recovery that Wall Street just a week ago seemed so sure was on the way.
When trading began in New York, the S&P 500 quickly fell 2.5%. Stocks that most desperately need the economy to reopen were hit particularly hard.
But some investors took advantage of the nervousness and bought stocks, which helped trim the S&P 500’s losses as the day progressed.
The index then popped decisively higher after the Fed announced it would buy individual corporate bonds. The purchases will be part of the central bank’s previously announced program to keep lending markets running smoothly, which enables 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 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 Monday to 3,066.59, which is 9.4% below the record high it set in February.
The Dow Jones industrial average rose 157.62 points, or 0.6%, to finish at 25,763.16. The Nasdaq composite climbed 137.21 points, or 1.4%, to 9,726.02.
“Volatility is here to stay, at least for a little while,” said Jason Pride, chief investment officer of private wealth at Glenmede. “Nobody in the financial industry has a good way to forecast this.”
Tallies of COVID-19 cases are still growing.
China is reporting a new outbreak in Beijing, one that appears to be the biggest since China largely stopped its spread at home more than two months ago.
In New York, the governor is upset that big groups of people are clumping together outside bars and restaurants without face masks, and he threatened to reinstate closings in areas where local governments fail to enforce the rules.
If coronavirus infections swamp the world, governments could bring back the orders for people to stay at home and for businesses to shut down.
Even if that doesn’t happen, rolling waves of outbreaks could frighten businesses and consumers enough to keep them from spending and investing, which would itself hinder the economy.
On Monday, the yield on the 10-year Treasury note rose to 0.71% from 0.69%. It tends to rise and fall with investors’ expectations for the economy and inflation, and it was above 0.90% earlier this month.