Stocks traded higher early Friday morning as investors looked to steer the S&P 500 away from official bear market territory.
The Dow Jones Industrial Average rose 260 points, or 0.8% as it looked to break a six-day losing streak, while the S&P 500 gained 1.6% and the Nasdaq Composite added 2.8%.
Friday’s moves came as all major averages were on track to end the week in the negative. The Dow is down 3.55%, while the S&P 500 and Nasdaq have slipped 4.7% and 6.4%, respectively.
Most S&P 500 sectors moved higher on Friday led by gains in consumer discretionary and information technology. American Express, Boeing, and Salesforce rose about 4% each, leading the Dow higher.
Following strong gains on Thursday, heavily shorted meme stocks AMC Entertainment and GameStop popped 13.8% and 8.5%, respectively. Carvana ripped 20% higher.
Meanwhile, Twitter shares plunged 13% after Elon Musk announced a standstill in the takeover deal as he awaits more details on the platform’s fake accounts.
The stock market has been slumping for months, starting with high-growth unprofitable tech stocks late last year and spreading to even companies with healthy cash flows stocks in recent weeks.The decline has wiped much of the rapid gains stocks enjoyed off their pandemic lows in March 2020.
“Large deviations from long-term price trends have been used for bubble identification. We find that US equities have been in a bubble based on this metric, and are now exiting it,” Citi strategist Dirk Willer said in a note to clients on Thursday.
One reason that stocks have struggled in recent months is high inflation, and the Federal Reserve’s attempts to contain prices by raising rates. Fed Chair Jerome Powell told NPR on Thursday that he couldn’t guarantee a “soft landing” that brought down inflation without causing a recession.
Though stocks enjoyed a two-week rally after the Fed’s first rate hike in March, those gains were quickly erased by a brutal April and the selling has continued in May. There are some signs, such as investor sentiment surveys and some stabilization in the Treasury market this week, that the market could be near, but many investors and strategists say the market may need to take another sizable step down.
“You’re getting this market that really is begging for a bottom, for a relief rally. But, at the end of the day, there really hasn’t been a capitulation day,” said Andrew Smith, chief investment strategist at Delos Capital Advisors.
On the earnings front, Affirm shares soared 31% on the back of a better-than-expected earnings report.
Meanwhile, developments in cryptocurrencies have also unnerved Wall Street this week, with bitcoin falling well below $30,000 and stablecoins struggling to hold their peg.
On Thursday, the S&P 500 and Dow bounced off their intraday lows but still fell 0.1% and 0.3%, respectively. The S&P closed down more than 18% from its high and on the brink of a bear market, while the Nasdaq squeaked out a gain of less than 0.1%.
The tech-heavy Nasdaq is already in a bear market, down more than 29% from its all-time high. Apple fell into its own bear market, becoming the last Big Tech name to succumb to the sell-off.