The Dow closed down 300 points Tuesday, while the Nasdaq Composite booked a fresh record close after the technology-laden benchmark briefly traded above a milestone 10,000 on growing economic optimism.
How did benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.48% shed 300.14 points, or 1.1%, to end at 27,272.30, snapping its longest win streak, six days, since the eight-session stretch ended Sept. 13, 2019. At session lows, the blue-chip index traded at 27,151.06. The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.48% fell 25.21 points, or 0.8%, closing at 3,207.18. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.29% advanced 29.01 points, or 0.3%, finishing at a record 9,953.75, after briefly touching an all-time intraday high of 10,002.50.
Meanwhile, the Nasdaq-100 index /zigman2/quotes/210598364/realtime NDX -0.37% , representing the largest companies within the Nasdaq Composite by market value, gained 65.65 points, or 0.7%, ending at 9,967.17.
On Monday, the Dow finished within 7% of its Feb. 12 closing peak, while the S&P 500 index ended the session 4.5% from its Feb. 19 record closing high. The Nasdaq gained 110.66 points, or 1.1%, ending at 9,924.74, marking its first all-time closing record in four months.
What drove the market?
The quickest stock market slump on record in February and March has been followed by one of the quickest recoveries ever, fueled by historic financial aid from the U.S. government and the Federal Reserve.
Th economic stimulus has helped lift not only technology behemoths engaging in swift business during COVID-19 lockdowns, but also lagging value stocks and downtrodden shares of companies hard-hit by the pandemic.
“An incredibly narrow market had been driving the market higher,” said Mike Skillman, chief executive officer of Cadence Capital Management in Boston. “The time was getting extraordinarily ripe for this kind of turn to happen.”
By Tuesday’s close, investors in S&P 500 index stocks recovered all but 0.7% of their losses for the year, following data published last Friday that showed American employment surprisingly increased from April to May.
However, the National Bureau of Economic Research also on Monday declared the U.S. recession started in February, ending a 128-month expansion—the longest dating to 1854. The World Bank’s forecast is for the global economy to shrink by 5.2% this year because of the coronavirus pandemic.
A report Tuesday on U.S. small-business owners in May turned more optimistic about an economic rebound and shifted to the view that a coronavirus-induced recession will be “short-lived,” a closely followed survey showed. The optimism of small companies in the U.S. economy rose 4.5 points last month to 94.4, the National Federation of Independent Business said Tuesday. The increase was twice as large as Wall Street had forecast.
“It does seem, at least right now, that even lower quality stocks seem to be finding interest,” said Noah Hamman, Founder & CEO of AdvisorShares, but he also noted that financial stocks like JPMorgan Chase & Co. /zigman2/quotes/205971034/composite JPM -0.84% and Bank of America Corp. /zigman2/quotes/200894270/composite BAC -1.33% remain about 20% on the year to date.
“It’s definitely a category that hasn’t seen as much of an increase as other sectors,” he told MarketWatch.