US stocks bounce higher, but still end the week with a 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 a day after the sell-off.
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, a
worrying trend that could intensify as people return to work and venture
out during the summer.
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.
“We
will continue to see volatility across the markets, as there is plenty
of uncertainty on what the reopening of the U.S. economy looks like,”
said Julie Fox, northeast private wealth market head at UBS Financial
Services.
In a press conference earlier this week, Fed Chair
Jerome Powell put a damper on hopes for a swift economic rebound from
the coronravirus pandemic, noting that surprisingly strong May hiring
data, while encouraging, was hardly enough to ensure that the job market
or the economy is back on track.
“This is a battle of optimism
and realism that’s been playing out over the last three months,” said
Adam Taback, chief investment officer for Wells Fargo Private Wealth
Management. “Optimism was winning over realism with a look toward 2021.
What Jerome Powell exposed is 2021 is not enough time. It’s likely 2022
or even 2023 before we will see ourselves get back to normal.”
Taback
said the job market remains the most important gauge of the economy’s
recovery, which is why he’s keeping an eye on data for signs that people
who were laid off or furloughed are getting rehired as businesses
reopen.
“The main thing to watch is how fast those jobs come back,
because they’ll be directly tied to how much consumers are spending,”
he said.
Technology, financial and industrial stocks were among
the big gainers Friday. Utilities stocks posted a small loss. Companies
that were among the biggest losers Thursday were big gainers Friday,
including airlines and cruise lines.
Bond yields rose. The yield on the 10-year Treasury yield increased to 0.69% from 0.65% late Thursday.
Oil
prices ended mixed. Benchmark U.S. crude oil for July delivery fell 8
cents to settle at $36.26 a barrel. Brent crude oil for August delivery
rose 18 cents to close at $38.73 a barrel.