TOKYO – Wall Street closed out a tumultuous year for stocks with more record highs Thursday, a fitting coda to the market’s stunning comeback from its historic plunge in the early weeks of the coronavirus pandemic.
The benchmark S&P 500 index finished with a gain of 16.3% for the year, or a total return of about 18.4%, including dividends. The Nasdaq composite, powered by high-flying Big Tech stocks, soared 43.6%. The Dow Jones Industrial Average gained 7.2%, with Apple and Microsoft leading the way.
The market’s milestone-setting finish follows a mostly upward grind for stocks in recent weeks, fueled by cautious optimism that the U.S. economy and corporate profits will bounce back in 2021 now that the distribution of COVID-19 vaccines is under way.
“We came into the year expecting slow growth and it turned out to be the fastest bear market recovery in history,” said Sunitha Thomas, national portfolio advisor at Northern Trust Wealth Management.
The virus pandemic shocked markets early in the year. The S&P 500 fell 8.4% in February, then plunged 12.5% in March as the pandemic essentially froze the global economy. Businesses shut down in the face of the virus threat and tighter government restrictions. People shifted to working, shopping and doing pretty much everything else from home.
The dire economic situation weighed heavily on almost any company that relied on direct consumer spending or a physical presence, including airlines, restaurants, hotels and mall-based retailers.
Volatility spiked. The Dow had several day-to-day swings of about 2,000 points. And the S&P 500 rose or fell by at least 1% on twice as many days in 2020 than it did, on average, since 1950.
The VIX, which measures how much volatility investors expect from the S&P 500, climbed to a record high 82.69 in March and remained above its historical average for much of the year.