S&P 500 erases 2020 losses as investors bet on a swift economic recovery from the coronavirus
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Ben Winck
Jun 9, 2020, 02:53 IST
Associated Press
The S&P 500 erased its year-to-date losses late Monday as investors' rejuvenated risk-on attitude outweighed fears of lasting fallout from the coronavirus pandemic.
The benchmark index plummeted as much as 34% from its mid-February peak before bottoming out on March 23.
The market began its rally that day after the Federal Reserve announced a slew of unprecedented relief programs. Investors viewed the policies as a backstop for risk assets and kicked off the market's swift upswing.
The S&P 500 wiped out its year-to-date losses in the final minutes of Monday trading as investors continued to shift focus from the recession to pile on bets on a historically quick economic recovery.
The benchmark US stock index sat roughly 34% below its mid-February peak on March 23 as the coronavirus pandemic spurred the fastest-ever plunge into bearish territory. On the same day, the Federal Reserve announced unprecedented steps to relieve pressure on markets and lenders. The central bank's pledge to purchase corporate debt lifted sentiments and drove record-pace buying activity.
Experts have referred to the Fed's actions as the spark for the stock market's rapid recovery. Before the central bank bought any corporate debt, investors rushed back into risky assets, confident the policy would serve as a backstop for sunken prices.
"This is, in part, a reflation story. The market sees conditions as ripe for a strong and sustainable period of economic recovery," said Lauren Goodwin, an economist and multiasset portfolio strategist at New York Life Investments. "It's also become a story of defeating COVID-19. Beyond the traditional cyclical upswing, we saw a strong rotation into companies and sectors most deeply impacted by the virus."
Still, the rally isn't perfectly impartial. An equal-weighted version of the S&P 500 remains 2.6% lower this year, having tumbled far more on initial coronavirus fears than its more popular peer.
A spate of positive signals has fueled the index's run-up in recent weeks. Investors initially shrugged off nationwide protests against police brutality to bet on economic reopenings. Indexes tracking the US services and manufacturing industries pointed to stabilization after months of sharp decline.
Friday's jobs report shocked economists, as the unemployment rate dropped to 13.3% in May from 14.7%. Experts expected the metric to reach roughly 20%. Employers added more than 2.5 million jobs, trouncing estimates of 7.5 million payrolls lost over the month.
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The S&P 500 closed at 3,232.39 on Monday, still down 4.7% from its intraday record on February 19.
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