The S&P 500 turned positive for the year on Monday, erasing a plunge that had taken the stock index down more than 30% by March, a testament to investors’ optimism about the economic recovery.
The Nasdaq Composite reached its first record close in nearly four months.
Friday’s surprisingly upbeat jobs report continued to stoke investor demand for stocks, analysts said. Shares of airlines, retailers, cruise liners and other companies tied to the reopening of the economy led the market higher.
Energy stocks also got a boost after the Organization of the Petroleum Exporting Countries struck a deal over the weekend to extend production cuts through July.
“There have been a number of indicators that have been in place for a number of weeks that would lead you to believe this is all points to us coming out of a recession,” said Andrew Slimmon, a managing director and senior portfolio manager at Morgan Stanley Investment Management.
Last week’s jobs report showed the U.S. economy added 2.5 million jobs in May, handily topping forecasts and giving investors some optimism that the U.S. may have passed the peak of the economic turbulence wrought by the coronavirus pandemic, Mr. Slimmon said.
In addition to the jobs report, Mr. Slimmon said other signs of a recovery include the outperformance of small-cap shares versus bigger ones and a pickup in breadth across the market as a higher percentage of stocks trade above their 50-day moving averages.
That has pushed Mr. Slimmon to be more bullish on so-called value stocks, and he has been tilting portfolios toward bigger allocations within financial, housing and real-estate investment trust stocks.
The Dow Jones Industrial Average added 461.46 points, or 1.7%, to 27572.44, and the S&P 500 gained 38.46 points, or 1.2%, to 3232.39, leaving the broad index up nearly 0.1% over its 2019 close.
The Nasdaq, meanwhile, turned positive after tumbling in early trading. The technology-laden index rose 110.66 points, or 1.1%, to 9924.74, its first record close since February.
The Dow and the S&P 500 remain 6.7% and 4.5%, respectively, from their February highs. A substantial rebound in technology stocks helped all three indexes recover a substantial portion of their losses from the market’s lows in March, but the sector’s outsize influence on the Nasdaq helped push that benchmark up more quickly.
Still, Mr. Slimmon admits many investors remain cautious and are keeping a significant chunk of their assets in cash. Money market assets remain at financial crisis highs at $5 trillion, Deutsche Bank said in a research note on Friday.
That could be due to investors perceiving a possible risk of a second wave of coronavirus infections as states reopen, which could be made worse by the national protests that followed the killing of George Floyd last month.
Some U.S. states are reporting an increase in the number of new infections after having lifted restrictions on social and business activity. California, Utah, Arizona, North Carolina, Florida, Arkansas and Texas, among others, have all logged rises in confirmed cases, according to a Johns Hopkins tabulation of a five-day moving average from over the weekend.
New York City, the U.S. area hit hardest by the pandemic, began reopening its economy Monday.
“The virus is not going to be gone in two months time,” said Oliver Jones, senior markets economist at Capital Economics. “The sectors that are vulnerable to lockdowns such as transport still show investors expect a slow or painful withdrawal from the measures in coming months.”
While economists, investors and others continue to assess the fallout from the pandemic, a group that dates business cycles declared Monday that the longest U.S. economic expansion on record came to an end in February.
The Business Cycle Dating Committee of the National Bureau of Economic Research said monthly economic activity “reached a clear peak” in February, marking the end of the 128-month expansion that began in mid-2009. The committee added that the magnitude of the decline in employment and production across the economy warranted designating the subsequent period as a recession.
On Monday, shares of cruise operators scored some of the biggest gains. Carnival rose $3.40, or 16%, to $24.91 and Norwegian Cruise Line Holdings added $4.43, or 20%, to $26.86.
Airlines also rose. United Airlines Holdings added $6.30, or 15%, to $48.69 while American Airlines rose $1.72, or 9.3%, to $20.31 and Delta Air Lines added $2.81, or 8.2%, to $36.97.
Casino operators such as MGM Resorts International and Wynn Resorts also gained. Shares of MGM rose $2.04, or 9.4%, to $23.76, while Wynn added $7.19, or 7.1%, to $108.80.
Among retailers, department store Kohl’s rose $2.25, or 8.5%, to $28.83, while apparel retailer Gap gained $1.34, or 11%, to $13.65.
Even with Monday’s gains, all of those stocks remain in the red for the year.
Energy stocks broadly rose, pushing the sector up 4.3%.
Elsewhere, the pan-continental Stoxx Europe 600 ticked 0.3% lower. In Asia, Japan’s Nikkei 225 added 1.4%, while the Shanghai Composite and South Korea’s Kospi Composite posted more tepid gains. Markets in Australia were closed for a holiday.
Airline stocks rose Monday as hopes for a sustained economic recovery build.
Photo: David Paul Morris/Bloomberg NewsWrite to Michael Wursthorn at Michael.Wursthorn@wsj.com and Anna Isaac at anna.isaac@wsj.com
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