The stock market rebounded slightly on Friday, attempting to recoup some of its losses from a day earlier when fears over a resurgence of coronavirus cases led to the worst market drop since March.
The Dow Jones Industrial Average was up 1.9%, nearly 500 points, on Friday, while the S&P 500 rose 1.3% and the tech-heavy Nasdaq Composite gained 1%.
Stocks jumped by as much as 3% at the open, but Wall Street’s comeback faded somewhat in the early afternoon, with the S&P at one point briefly turning negative.
Despite Friday’s rally, both the Dow and S&P saw their biggest weekly losses since March 20. The moves come a day after the S&P and Dow posted their biggest single-day losses since the coronavirus sell-off in March, falling nearly 6% and 7%, respectively.
Investors on Friday piled back into stocks that would benefit from a reopening of the economy: Cruise lines, airlines and retailers all jumped. Those same reopening stocks were hard-hit in Thursday’s sell-off, amid concerns about a resurgence of coronavirus cases as states start to reopen.
Many states that loosened lockdown restrictions have seen a spike in new cases: Texas and Florida, for example, were among some of the first to reopen, but they are now reporting record numbers of hospitalizations.
Expectations for a quick economic recovery are dwindling, after the Federal Reserve on Wednesday provided a grim update on the economy: The Central Bank forecasted unemployment will remain high for years and said interest rates will stay near zero until at least 2022.
“Stocks were overdue for a pullback after rallying more than 40% off the March lows and pricing in what we believe is an overly optimistic economic outlook,” says Jeff Buchbinder, equity strategist for LPL Financial. “More COVID-19 spread in a few southern and western states and a gloomy outlook from the Fed provided the spark for some of the froth to come out.”
“We can’t shut down the economy again,” Treasury Secretary Steven Mnuchin told CNBC on Thursday. “I think we’ve learned that if you shut down the economy, you’re going to create more damage,” he warned.
While the market recovered some of its losses from the brutal sell-off on Thursday, the S&P and Dow posted their biggest weekly losses since March 20, when they all dropped at least 12% amid widespread economic shutdowns during the pandemic. Federal Reserve chairman Jerome Powell reiterated at his press conference on Wednesday that while “there is great uncertainty about the future,” the Central Bank is strongly committed to doing “whatever we can, for as long as it takes” to help support the economy. Before this week, stocks had continued to rally on optimism about reopening the economy: The S&P 500 on Monday turned positive for 2020, fully recouping its losses from the coronavirus selloff earlier this year. But the market is now taking a sizable hit amid rising concerns over a resurgence of coronavirus cases.