Stock market today: Bulls run again on Wall Street as S&P 500 climbs 20% above October low

NEW YORK (AP) Stocks rose just enough on Thursday to send Wall Street into another bull market as the S&P 500 continues to rally to its low from last fall.

The index rose 0.6% to take it 20% above a low reached in October. That means Wall Street’s main measure of health has emerged from a painful bear market, which saw it fall 25.4% over roughly nine months.

The Dow Jones Industrial Average added 168 points, or 0.5%. The Nasdaq composite, meanwhile, led the market with a 1% rise. That has been the norm so far in this bull run, as chipmaker Nvidia and a handful of other big tech stocks have been responsible for the lion’s share of Wall Street’s gains.

Declaring the end of a bear market may seem arbitrary, but it is a useful marker for investors. It’s also a reminder that investors who can weather downturns have almost always recouped all of their losses in S&P 500 index funds.

Even though it was driven by so many superlatives, the worst inflation in generations and the fastest interest rate hikes in decades, for example, this most recent bear market only lasted about nine months. . It stretched from January 3, 2022, when the S&P 500 set a record, until October 12, when it bottomed. This is shorter than the typical bear market, and it also resulted in a shallower than average loss.

In hindsight, it might not look so bad, but it certainly was bad at the time, said Brent Schutte, chief investment officer at Northwestern Mutual.

What made the last year even more painful for investors was that stocks and bonds lost money, he said, something that hasn’t happened in decades.

Much of these gains in bull markets are due to the economy refusing to fall into recession despite repeated predictions. It has withstood the highest interest rates since 2007, three high-profile US bank collapses since March, another threat from the US government of an economy-shaking default and a host of other challenges. .

Bottom line, the economy has been very resilient, said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

So much negativity has been baked into the market, he said. Although it’s too early to know for sure, stocks seem to be doing what they normally do when all the negativity has been discounted in the stock market: they’re starting to rise in anticipation of better days ahead.

Not only has the economy avoided a recession due to a remarkably strong labor market and consumer spending, but hopes are also growing that the Fed may soon stop raising interest rates.

High rates help reduce inflation by slowing the overall economy and putting pressure on stock prices and other investments.

The general expectation among traders is that the Fed will hold rates steady next week, which would mark the first meeting where it hasn’t raised rates in over a year. Although it may raise rates once more in July, Wall Street’s hope is that it won’t go beyond that. Inflation has been falling since its peak last summer.

But many challenges remain for the stock market.

Chief among them is that no one can be sure when the Fed will stop raising rates. Even though inflation has eased, it has remained stubbornly above the Fed’s comfort level and continues to hurt all kinds of households, especially low-income ones.

This causes some investors to continue to prepare for an upcoming recession, even as they continue to forecast that it will arrive in a few months.

It’s been a strange and uneven recovery from the recession that caused the COVID pandemic, Northwestern Mutuals Schutte said. It’s been a strange push and even into the recession.

Another warning sign for skeptics is the proportion of S&P 500 gains this year that have been concentrated in just a handful of stocks.

Hopes of a pause from the Fed were particularly helpful for large, high-growth stocks. Investors see them benefiting the most from easier interest rates because that’s what has happened in the past.

Add to that the euphoria around artificial intelligence stoked by last month’s huge sales forecast from Nvidia, and just seven stocks were responsible for the majority of the S&P 500’s gain this year.

Nvidia, Apple, Microsoft and other Big Tech giants have a huge influence on the S&P 500 because they are the biggest, and the index gives stocks more weight based on their size. Nearly half of S&P 500 stocks, meanwhile, are down for the year so far.

Thursday offered a good example. The biggest forces pushing the S&P 500 up include Apple, Microsoft and Nvidia. Big Tech gained as expectations built for the Fed to pause on rates next week.

That’s because a report showed the highest number of American workers applied for unemployment benefits last week since October 2021. A cooling labor market could push against pressure that could have bolstered policy after the central banks of Canada and Australia have recently raised their own interest rates. .

But the S&P 500 was almost split between winners and losers. Smaller stocks in the Russell 2000 Index, meanwhile, slipped 0.4%.

The arrival of a bull market also does not mean that the stock market has returned to its previous highs. Because of the math, a 25% drop for the S&P 500 requires a 33% rally to follow to break even.

In total, the S&P 500 rose 26.41 points to 4,293.93. The Dow gained 168.59 to 33,833.61 and the Nasdaq rose 133.63 to 13,238.52.

After the jobless data hit the market, Treasury yields gave up gains from earlier in the morning. The 10-year Treasury yield fell to 3.71% from 3.78% on Wednesday evening. It helps set the rates for mortgages and other large loans.

The two-year yield, which moves more in line with Fed expectations, fell to 4.53% from 4.55%.

AP Business Writers Yuri Kageyama and Matt Ott contributed.