Stocks jumped on Monday, recovering from earlier losses, as the Federal Reserve announced further measures to support the market amid the coronavirus pandemic.
Shares of Facebook, Amazon, Netflix and Apple led the gains, rising more than 1% each. JPMorgan Chase, Citigroup, Wells Fargo and Bank of America gained at least 0.8%.
Earlier in the day, the major stock averages fell sharply. The Dow traded more than 760 points lower before rebounding. The S&P 500 and Nasdaq fell as much as 2.5% and 1.9%, respectively.
The Fed said it would buy individual corporate bonds, marking a broader approach to corporate bond buying. The Fed previously had indicated that it eventually would buy bonds on the primary market, but Monday's announcement marked an expansion of that into the secondary market. This latest announcement also shows the Fed will continue to support credit markets during the coronavirus.
"The Fed is always going to try and show who's boss," said Ilya Feygin, senior strategist at WallachBeth Capital. "It's continuously proving it can do more and it's effective."
"That's been the primary driver of this market," Feygin said.
The iShares iBoxx Investment Grade corporate bond ETF (LQD) shot up to its session high after the Fed announcement, closing more than 1% higher.
Monday's action followed a big pullback last week triggered by rising fears of a resurgence in the virus as well as investors' profit-taking after the massive comeback.
The Dow and S&P 500 lost 5.5% and 4.7% last week, respectively, while the Nasdaq shed 2.3%. All three major equity benchmarks suffered their worst week since March 20.
"The meltup may need to take a break, as sentiment has turned too bullish too rapidly," Ed Yardeni, president and chief investment strategist at Yardeni Research, said in a note on Sunday. "Now that reopening is happening, there's fear of suboptimal results: less social distancing triggering a second wave of the virus, followed by another round of lockdowns."
States in the reopening process including Alabama, California, Florida and North Carolina are reporting a rise in daily new coronavirus cases. Texas and North Carolina reported a record number of virus-related hospitalizations Saturday. Dr. Scott Gottlieb, former FDA chief, told CNBC emerging coronavirus hotspots could "quickly get out of control."
Meanwhile, Governor Andrew Cuomo warned New Yorkers against triggering a second wave of the coronavirus. He said on Sunday the state has received 25,000 complaints about businesses violating rules of the phased reopening, threatening to take liquor licenses from bars and restaurants.
"The coronavirus is spiking up again and that's a problem," said Peter Cardillo, chief market economist at Spartan Capital Securities, noting: "There was also over-exuberance in the market. The market was discounting a quicker economic rebound."
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