Stocks jumped Friday, trimming losses from another down week and preventing the S&P 500 from tumbling into the bear market.
The Dow Jones Industrial Average rose 466.36 points to 32,196.66, or 1.47%. The S&P 500 gained 2.39% to close at 4,023.89 and the Nasdaq Composite jumped 3.82% to 11,805.
The S&P 500 on Friday finished its best day since May 4, while the Nasdaq posted its strongest one-day gain since November 2020.
Joining Friday’s gains, the major gains posted losses for the week, with the Dow closing down 2.14% and posting its first 7-week losing streak since 2001. The S&P 500 fell 2.4% and hit its longest weekly losing streak since 2011, while the Nasdaq slipped 2.8%.
“Just as trees don’t climb the sky, prices won’t fall forever,” said Sam Stovall, chief investment strategist at CFRA. “Even in corrections and approaching bear markets, they tend to experience relief rallies, which is what the markets are seeing today.”
All the S&P 500 sectors closed higher Friday led by gains in consumer discretionary and information technology, which added 4.1% and 3.4%, respectively. It was a broad-based comeback with about 95% of the S&P 500 ending the season in the green.
Nike and Salesforce closed up 4.7% and 4.1%, leading the Dow higher. American Express and Boeing added more than 3% each, further pulling up the index.
Beaten-up tech stocks also made a comeback as Meta Platforms and Alphabet gained 3.9% and 2.8%, respectively. Tesla jumped 5.7% while battered semiconductors Nvidia and AMD also popped more than 9%. Apple rose 3.2%, steering itself out of the bear market market.
Following strong gains on Thursday, heavily shorted meme stocks AMC Entertainment and GameStop jumped 5.5% and 9.9%, respectively.
Meanwhile, Twitter shares plunged 9.7% after Elon Musk announced a stand-in takeover deal as it awaits more details on the platform’s fake accounts. In other news, Robinhood popped up 24.9% after crypto CEO Sam Bankman-Fried acquired a stake in the company.
The stock market has been slumping for months, starting with high-growth unprofitable tech stocks late last year and spreading to even companies with healthy cash flows stocks in recent weeks. The decline has wiped much of the rapid gains stocks off their pandemic lows in March 2020.
So far, the S&P 500 and Dow have avoided bear language but Friday’s rally doesn’t mean markets are out of the woods just yet, said Ryan Detrick of LPL Financial.
“There probably isn’t too much downside risk in our opinion but we could have one more whoosh lower,” he said, adding that the average trend on bear markets is about 23% to 25% mark when there is no recession.
One reason that stocks have struggled in recent months is high inflation, and the Federal Reserve’s efforts to contain prices by raising rates. Fed Chair Jerome Powell told NPR on Thursday that he couldn’t guarantee a “soft landing” that brought down inflation without causing a recession.
Although the stocks enjoyed a two-week rally after the Fed’s first rate hike in March, those gains were quickly erased by a brutal April and the sale continued in May. There are some signs, such as investor sentiment surveys and some stabilization in the Treasury market this week, that could close the market, but many investors and strategists say the market may need to take another sizable step down.
“You’re getting this market that is really begging for a bottom, for a relief rally. But, at the end of the day, there really has been no capitulation day,” said Andrew Smith, chief investment strategist at Delos Capital. Advisors.
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