Nasdaq notches new record as investors bet on economic rebound
The Nasdaq closed at a record high Monday, while the S&P 500-stock index moved back into positive territory for the year as stocks powered higher following Friday's surprisingly strong jobs report.
The S&P 500 is now within 5% of its record set in February, which a panel of economists said on Monday is when the recession officially began.
The Dow added 461 points, or 1.7%, on the day to close at 27,572, with investors increasingly confident that the worst may have already passed.
The Nasdaq composite added 111 points, or 1.1%, to end at 9,925, eclipsing the tech-heavy index's previous high of 9,817 on February 19.
Stocks that would benefit most from an economy that's growing again were rising the most on Monday, but pullbacks for a handful of big tech stalwarts were keeping the market's overall gains in check.
Stocks have been rising since late March, at first on relief after the Federal Reserve and Capitol Hill pledged to support the economy and more recently on hopes that the recovery may happen more quickly than forecast.
Such hopes got a huge boost Friday when the U.S. government said that employers added 2.5 million jobs to their payrolls last month. Economists were expecting to see 8 million additional jobs lost during May.
States across the country are slowly relaxing restrictions on businesses meant to stymie the spread of the coronavirus outbreak, which is raising expectations that the economy can pull out of its coma. New York City began reopening on Monday, for example, allowing construction and "nonessential" retailers to start operating again with some restrictions.
That puts more scrutiny on economic reports this week as investors look for confirmation that Friday's jobs report was a true inflection point and not just an aberration.
Even if the economy did hit its bottom in the past month or so, economists warn that many risks are still looming over a very long road back to full recovery, such as a flareup in U.S.-China tensions.
"The most recent extension of valuations may again make U.S. equity markets vulnerable to disappointments about much discussed, but little understood factors, including future COVID-19 infection rates, the pace of the anticipated economic recovery and, increasingly, escalating geopolitical tensions between China and the United States," analysts with the Wells Fargo Institute said in a report.
Critics are also still saying the stock market may have risen too quickly and may be setting investors up for disappointment, with the biggest risk being another wave of coronavirus infections that leads to more lockdowns.
"It all starts with the virus itself, and there haven't been any immediate rise in infections," said Tom Martin, senior portfolio manager at Globalt Investments.
He's still far from giving the all-clear.
"There's a lot of risk that businesses and the economy don't recover as fast," Martin said. "When money starts running out in July, are we enough on a path to getting people employed and businesses open?"
