The Mercury News Weekend

S&P 500 sees another record high to end 2020

- By Damian J. Troise and Alex Veiga

Wall Street closed out a tumultuous year for stocks with more record highs Thursday, a fitting coda to the market’s stunning comeback from its historic plunge in the early weeks of the coronaviru­s pandemic.

The benchmark S&P 500 index finished with a gain of 16.3% for the year, or a total return of about 18%, including dividends. The Nasdaq composite, powered by high-flying Big Tech stocks, soared 43.6%. The Dow Jones Industrial Average gained 7.2%, with Apple and Microsoft leading the way.

The market’s milestone-setting finish follows a mostly upward grind for stocks in recent weeks, fueled by cautious optimism that the U. S. economy and corporate profits will bounce back in 2021 now that the distributi­on of COVID-19 vaccines is under way.

“We came into the year expecting slow growth and it turned out to be the fastest bear market recovery in history,” said Sunitha Thomas, national portfolio advisor at Northern Trust Wealth Management.

T he v ir us pandemic shocked markets early in the year. The S&P 500 fell 8.4% in February, then plunged 12.5% in March as the pandemic essentiall­y froze the global economy. Businesses shut down in the face of the virus threat and tighter government restrictio­ns. People shifted to working, shopping and doing pretty much everything else from home.

The dire economic situation weighed heavily on almost any company that relied on direct consumer spending or a physical presence, including airlines, restaurant­s, hotels and mallbased retailers.

Volatility spiked. The Dow had several day- today swings of about 2,000 points. And the S& P 500 rose or fell by at least 1% on twice as many days in 2020 than it did, on average, since 1950.

The VIX, which measures how much volatility investors expect from the S& P 500, climbed to a record high 82.69 in March and remained above its historical average for much of the year.

The wave of selling accelerate­d as the economic fallout from the pandemic widened, leaving many longterm investors looking on as their gains after a blockbuste­r 2019 for stocks evaporated. Five months later, the market recouped all of its losses.

“It was probably very hard to imagine getting those back in such a short

period fo time,” said Shawn Cruz, senior market strategist at TD Ameritrade.

Wall Street ’ s recovery was due in large part to unpreceden­ted actions from the Federal Reserve and Congress to support the economy. Investors also flocked to big technology companies such as Apple and Amazon and smaller companies like Grubhub and Etsy that were poised to take advantage of the shift to working and shopping from home.

The S& P 500 jumped 12.7% in April. From there, markets disconnect­ed from the rest of the still-reeling economy and pushed higher in fits and starts as vaccine developmen­t progressed and analysts and economists looked ahead to the eventual end of the pandemic.

Markets were mostly quiet on the final day of trading for the year. Several overseas markets were closed for holidays, and U.S. markets will be closed for New Years Day on Friday.

The S&P 500 rose 24.03 points, or 0.6%, to 3,756.07, an all-time high. The Dow rose 196.92 points, or 0.7%, to 30,606.48, a record high.

The Nasdaq rose 18.28 points, or 0.1%, to 12,888.28.

The Russell 2000 index of smaller companies fell 5.14 points, or 0.3%, to 1,974.86. Smaller companies notched strong gains in recent weeks after lagging in the early months of the broader market rebound. The Russell 2000 ended the year with a gain of 18.4%.

The yield on the 10-year Treasury note rose to 0.92% from 0.91% late Wednesday.

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