Markets rally amid new Fed push to spur economy Central bank says it will buy individual corporate bonds
NEW YORK — 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 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 last week.
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 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 trimmed 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 helping 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 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.
“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.”
Case numbers are still growing in states across the country and nations around the world. Governments are relaxing lockdowns in hopes of nursing their devastated economies back to life, but without a vaccine, the reopenings could bring on further waves of COVID-19 deaths.
The biggest worry for markets is if infections swamp the world, then governments could bring back the orders for people to stay at home and for businesses to shut down that sent the economy into its worst recession in decades.
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.
Besides its corporate bond buying program, the Fed has also cut interest rates back to nearly zero and expects to keep them there through 2022. Its chair, Jerome Powell, may offer more details about the Fed’s outlook in scheduled testimony before Congress this week.