Stocks shed early gains, but still on track for winning week

NEW YORK – Wall Street careened through all the forces that have pushed and pulled it through the week, at first rising on Friday amid hope for the economy and then falling on worries about worsening coronavirus levels in some states, all before ending with modest losses.

The S&P 500 dropped 0.6%, a relatively small move to cap its fourth weekly gain in the last five. But the market swung between a gain of 1.3% and a decline of 1%, another example of how uncertainty is the dominant force over Wall Street as investors weigh budding improvements in the economy against worsening infection levels in the South and West.

The Dow Jones Industrial Average dropped 208.64 points, or 0.8%, to 25,871.46 after earlier swinging from a gain of 371 points to a loss of 320 points. The Nasdaq composite inched up by 3.07 points, or less than 0.1%, to 9,946.12. The S&P 500 fell 17.60 points to 3,097.74.

Also exacerbating volatility was Friday’s simultaneous expiration of contracts for stock options and futures, an occasional occurrence that can drive bouts of buying and selling and is known as “quadruple witching day.”

Early in the day, U.S. stocks appeared set to follow European and Asian markets higher and follow through on Wall Street’s momentum from earlier in the week.

Stocks had rebounded from last week’s 4.8% drop, the worst in nearly three months, in large part because of a report showing U.S. shoppers spent much more last month at stores and online retailers than economists expected. That followed up on encouraging data about the U.S. jobs market and bolstered hopes that the economy can pull out of its recession relatively quickly.

“You’re seeing big moves off of very weak numbers,” said Quincy Krosby, chief market strategist at Prudential Financial. “What’s happening is the data are getting less bad.”

Economists at Bank of America now expect the U.S. economy to shrink 5.7% this year, a severe contraction but not as bad as their earlier forecast for an 8.1% plunge.

“Economic data continue to point to a faster and stronger initial recovery,” they wrote in a BofA Global Research report. Some of that is due to economic activity being pulled forward from what they had expected to occur next year, ahead of a long road to full recovery.

The Federal Reserve also reminded markets this week how much it’s doing to prop up the economy.

The central bank said early in the week that it will buy individual corporate bonds as part of its previously announced plan to support lending markets for big employers. Later in the week, the Fed’s chair said it plans to continue to keep interest rates pinned at nearly zero to help cushion against the recession.

It was huge efforts by the Fed, along with spending by Congress, that helped the stock market turn around in March from its nearly 34% plunge.

But markets took a sharp turn lower Friday afternoon.