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The S&P 500 erased 2020 losses in Monday trading as investors’ risk-on attitude outweighed fears of recession and believed that there would be a relatively quick global economic recovery.
The benchmark US stock index plummeted 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 shore up the reeling economy. The central bank’s pledge to purchase corporate debt as a series of emergency landing programs.
Experts have credited 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.
Nasdaq Composite retraced its steep losses a step before the S&P 500, surging on growing inflows to mega-cap tech stocks. However, the S&P 500’s rally is far broader, led by soaring energy firms alongside Royal Caribbean Cruises, Lincoln National, and Apache.
Still, the rally is not 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 tech-heavy peer.
Indexes are rallying up despite nationwide protests as investors bet on economic reopenings. This shows that the US services and manufacturing industries pointed to stabilization after months of sharp decline.
Friday’s NFP report was a complete labor market surprise as the unemployment rate dropped to 13.3% in May from 14.7%. Employers created more than 2.5 million jobs, trouncing estimates of 7.5 million payrolls lost over the month.
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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