(CNN) — The remarkable stock market comeback of 2020 briefly had another notch in its belt Monday: Stocks once again turned positive for the year. But the sizable rally fizzled late in the day, and the market turned negative.
California’s decision to close indoor spaces, such as bars, restaurants and movie theaters, made some investors question whether America’s economic recovery was sustainable.
The Dow which surged as many as 563 points, ended the day up just 11 points. The S&P 500 at one point was up 1.6% and briefly turned positive for 2020. But it sank about 0.9% by market’s close. The Nasdaq swung the most — it had been up 1.9% and closed down 2.1%.
The rocky session was notable in some particularly volatile stocks. For example, Tesla, which was up 14% earlier in the day, was up just 1% at the end of Monday’s session.
The stock rocket took off in the early spring as investors bet — correctly — that the Federal Reserve and US Congress would pump the economy full of stimulus. That came in the form of business loans, asset purchases, stimulus checks and other programs that helped keep the economy from collapse.
However, as the US economy reopens, COVID-19 cases continue to set new records after dissipating for a couple months. That has forced some states and municipalities to rethink their reopening plans.
Corporate earnings in the second quarter are almost certainly going to be the worst since the 2008 financial crisis, plummeting 45%, Wall Street analysts predict. JPMorgan Chase, Bank of America and Citigroup, which kick off earnings season this week, are all expected to reveal their second-quarter profits crashed by 50% or more.
But investors know the second quarter is a wash, and some investors are hopeful that the reopening of some parts of the economy in May and June gave earnings a late-spring boost — not enough to turn them positive, but perhaps not quite as negative as predicted.
Absent a few hiccups along the way, bullish sentiment has returned to Wall Street. Investors are for the most part ignoring the dire warnings from governors and mayors that the coronavirus pandemic continues to threaten the economy. If anything, in this “bad news is good news” environment, a worsening economic climate might convince Congress and the Fed to pump companies and consumers with even more stimulus dollars.
Who woulda thunk in March, when the longest-ever bull run in stock market history came to a screeching halt, that stocks would turn positive again just a few months later? The coronavirus pandemic led to the S&P 500 to plunge 34% from an all-time high on February 19 to its nadir on March 23. Since then, however, the stock market has rocketed back more than 40%.