S&P 500 closes at a record, erasing last of pandemic losses

Wall Street clawed back the last of the historic, frenzied losses unleashed by the new coronavirus, as the S&P 500 closed at an all-time high Tuesday.

The day’s move was a relatively mild one, nudging the index up 0.2%, to 3,389.78. That eclipses the S&P 500′s previous record of 3,386.15, which was set Feb. 19, before the pandemic shut down businesses around the world and knocked economies into their worst recessions in decades.

The S&P 500′s milestone caps a furious, 51.5% rally that began in late March. The index, which is the benchmark for many stock funds at the heart of 401(k) plans, is now up nearly 5% for the year.

The stock market’s sprint back also means that the gut-wrenching, nearly 34% plunge for the S&P 500 from Feb. 19 through March 23 was the quickest bear market on record. It lasted barely more than a month.

Tremendous amounts of aid from the Federal Reserve and Congress helped launch the rally, which built higher on signs of budding growth in the economy. More recently, corporate profit reports that weren’t as bad as expected have helped boost stock prices.

The lightning recovery is even more remarkable considering how much the economy is still struggling and how uncertain the path ahead remains. Millions of Americans are continuing to get unemployment benefits, and businesses across the country are still shutting their doors. COVID-19 continues to seep throughout the world, with more than 5.4 million known cases and 170,000 deaths in the United States alone.

Many investors acknowledge the disconnect between the stock market and the broader economy, but they say the rally has been built on top of several supports.

Key among them is that the Federal Reserve and Congress have plowed trillions of dollars into the economy, to keep it from plunging even more deeply.

More recently, the market’s rally has morphed from relief that the worst-case scenario of a full-blown financial crisis is off the table to hopes that the economy is on the mend.  Investors are looking further into the future and betting on one where corporate profits can broadly bloom again after a vaccine for COVID-19 hits the market later this year or in 2021.

On Tuesday the Dow Jones Industrial Average fell 66.84 points, or 0.2%, to 27,778.07. It remains 6% below its record set in February. The Nasdaq composite had already returned to a record, thanks to huge gains for the big tech stocks that dominate it. It climbed 0.7%, to 11,210.84.