Stocks bounce higher, but still end week with loss
Wall Street managed to end a bumpy day broadly higher Friday but still finished with its worst week in nearly three months.
The S&P 500 rose 1.3% a day after dropping nearly 6% in its biggest rout since mid-March. It lost 4.8% for the week, snapping a three-week winning streak for the benchmark index. Small-company stocks and bond yields rose, meaning investors were a bit more willing to take on risk again.
The volatility this week interrupted what had been a dramatic rally for the market as investors re-evaluated their expectations for future economic growth, which many skeptics have been saying were overly optimistic.
After surging Monday, stocks sold off for three straight days as a rise in COVID-19 cases in the U.S. and a discouraging economic outlook from the Federal Reserve dashed investors’ optimism that the economy will recover relatively quickly as states lift stay-at-home orders and businesses reopen.
“Yesterday was the market taking a needed breath and saying ‘OK, this is probably going to take more time than we were expecting,” said Willie Delwiche, investment strategist at Baird. “Today, it’s ‘maybe we overreacted yesterday.’”
The comeback rally lost some of its early strength as the day went on. The S&P 500 gained 39.21 points to 3,041.31 after shedding more than half of its early gains.
The Dow Jones Industrial Average rose 477.37 points, or 1.9%, to 25,605.54. It had been up more than 800 points in the early going.
The Nasdaq, which climbed above 10,000 points for the first time on Wednesday, gained 96.08 points, or 1%, to 9,588.81. The Russell 2000 index of smaller companies fared better than the rest of the market, climbing 31.46 points, or 2.3%, to 1,387.68. European markets closed mostly higher. Asian markets ended broadly lower.
Investors have been balancing optimism about the reopening of the economy against the possibility that the relaxing of restrictions will lead to a surge in new coronavirus infections and fatalities. Cases are climbing in nearly half the states, according to an Associated Press analysis.
Despite the uncertainty, stocks have mounted a historic comeback the past couple of months, with the S&P 500 rallying 44.5% between late March and Monday, erasing most of its losses tied to the pandemic. It’s unclear if Thursday’s market sell-off reflected a fundamental reassessment of the economic outlook or a one-off drop as traders cashed in on the market’s recent gains.