U.S. stocks bounced back Wednesday from a three-day sell-off that sliced 10 percent off the Nasdaq composite and pummeled companies that had largely been resilient during the coronavirus pandemic.
The Dow Jones industrial average advanced 439.91 points, or 1.6%, to close at 27,940.80. The Standard & Poor’s 500 index gained 67.19 points, or 2.0%, to end at 3,398.96, while the Nasdaq composite jumped 293.87 points, or 2.7%, to settle at 11,141,56.
The S&P 500 had its best day since June and the Nasdaq had its biggest one-day gain since April.
Technology shares led the rebound, just as they led the three-day sell-off that slashed 10% off the Nasdaq, dragging the tech-centric index into correction territory. Tesla and Apple, two companies that had been battered in recent days after months of tremendous gains, shot up 6.3% and 4.4%, respectively. Amazon and Microsoft both jumped at least 4%, while Facebook climbed more than 1%. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)
Kristina Hooper, chief global market strategist at Invesco, said the sentiment driving Wednesday’s rally is the same as the one that has driven investors into stocks for the past six months—there are no real alternatives for finding favorable returns, Plus, the Federal Reserve has accommodated Wall Street through its expansive monetary policy.
“Jay Powell has become Santa Claus, the Tooth Fairy and a leprechaun with a pot of gold, all wrapped into one,” she said, referring to the Fed’s chair. “Now that doesn’t mean stocks won’t be volatile and they won’t have their down days. But we have to recognize that the Fed is a powerful force that is likely to drive investors back into equities, especially tech.”
Analysts say that the multiday sell-off was a healthy sign of the stock market returning to Earth, after an extraordinary run during the initial spread of the virus. The massive gains on Wall Street highlighted the disconnect between soaring valuations and enriched shareholders vs. the broader U.S. economy suffering from historic levels of unemployment and extreme disruptions to operations and daily life.
The S&P and the Nasdaq had set record highs several times over last month. But those gains were largely wiped in three volatile trading days in what has been a historically poor performing month. Though Wednesday’s session delivers at least a temporary reprieve to the frenzied selling, broader economic and political issues will continue to weigh on investors, including trade tensions with China, stalled coronavirus stimulus negotiations and uncertainty over the upcoming election.
Meanwhile, the virus itself continues to kill thousands of Americans every week. At least 187,000 people have died of COVID-19-related illnesses, and more than 6.3 million have become infected.
AstraZeneca shares fell 1.7% after the pharmaceutical giant paused the global trial of its coronavirus vaccine candidate after a participant in the United Kingdom suffered what is suspected to be a severe adverse reaction. In a statement, the company said it voluntarily suspended its late-stage trial to determine the cause of the unexplained illness. AstraZeneca is developing the vaccine alongside the University of Oxford, and is one of several drug companies racing to create and vet a way to prevent novel coronavirus infections. The stock fell by 1.4% in the afternoon session.