Stocks jumped Friday, paring losses from another bearish week and preventing the S&P 500 from plummeting 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 rose 3.82% to 11,805.
The S&P 500 on Friday ended its best day since May 4, while the Nasdaq posted its strongest daily gain since November 2020.
Despite Friday’s gains, the major moving averages for the week were down, 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 experienced its longest weekly losing streak since 2011, while the Nasdaq slipped 2.8%.
“Just like trees don’t rise to the sky, prices don’t fall forever,” said Sam Stovall, chief investment strategist at CFRA. “Even in corrections and approaching bear markets, they tend to experience recovery rallies and that is what markets appear to be starting to do today.”
All sectors of the S&P 500 ended higher on Friday, led by gains in consumer discretionary and information technology, up 4.1% and 3.4%, respectively. It was a broad-based comeback, with about 95% of the S&P 500 ending the session in the green.
Nike and Salesforce closed up 4.7% and 4.1%, respectively, leading the Dow higher. American Express and Boeing each gained more than 3%, dragging the index higher.
Troubled tech stocks also staged a comeback, as Meta Platforms and Alphabet gained 3.9% and 2.8%, respectively. Tesla rose 5.7%, while troubled semiconductors Nvidia and AMD also rose more than 9%. Apple rose 3.2%, steering out of bear market territory.
After sharp gains on Thursday, heavily shorted meme stocks AMC Entertainment and GameStop rose 5.5% and 9.9%, respectively.
Meanwhile, Twitter shares plunged 9.7% after Elon Musk announced a standstill on the takeover deal as he awaits more details on the platform’s fake accounts. In other news, Robinhood surged 24.9% after crypto CEO Sam Bankman-Fried bought a stake in the company.
The stock market has been plummeting for months, starting with high-growth, unprofitable tech stocks late last year and even spreading to companies with healthy cash flow stocks in recent weeks. The decline wiped out much of the quick gains the stocks enjoyed from their March 2020 pandemic lows.
So far, the S&P 500 and Dow have avoided bear territory, but Friday’s rally doesn’t mean markets are out of the woods just yet, said LPL Financial’s Ryan Detrick.
“In our view, there probably isn’t all that much more downside risk, but we could still have a wish lower,” he said, adding that on average bear markets tend to bottom around the 23% to 25% mark when there is no recession.
One reason stocks have struggled in recent months is high inflation and attempts by the US Federal Reserve to contain prices by raising interest rates. Fed Chair Jerome Powell told NPR on Thursday he could not guarantee a “soft landing” that would bring inflation down without triggering a recession.
Although stocks rallied for two weeks after the Fed’s first rate hike in March, a brutal April quickly erased those gains and the selling continued into May. There are some signs, such as investor sentiment surveys and some stabilization in the Treasury market this week, that the market may be close, but many investors and strategists say the market may need to take another sizeable step down .
“You get this market that’s really screaming for a bottom after a recovery rally. But at the end of the day, there really wasn’t a day of surrender,” said Andrew Smith, chief investment strategist at Delos Capital Advisors.
https://www.cnbc.com/2022/05/12/stock-futures-open-to-close-bear-market.html Nasdaq climbs 3%, Dow jumps 400 points on a comeback rally after sharp losses earlier in the week