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Major indices eke out gains Monday as Fed says it will buy individual corporate bonds

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Markets managed to recover some losses Monday, as the S&P 500 closed up 0.8% on Monday (after trading down as much as 2.5%), while the Dow closed 0.6% higher. Stocks rebounded once the Fed announced it will be buying individual corporate bonds in further efforts to support credit markets.

But investors have recently had a second wave of the coronavirus on the brain, as markets fell early on Monday (adding to a pullback last week that saw the worst one-week drop in the S&P 500 and Dow since March). Last week, markets shaved off over 5% amid growing concerns of spiking infections and a somewhat gloomy outlook from the Fed. CFRA’s Sam Stovall says markets were “looking for a catalyst that could cause a correction”— triggering what Stovall calls “announcement anxiety.”

Edward Jones’ Nela Richardson suggests investors have perhaps gotten ahead of themselves—”There is this tendency to be overly-optimistic in a V-shaped recovery without recognizing that it will be harder to turn the lights on than it was to turn the lights off,” she told Fortune. Meanwhile, at this stage of the market rebound, a correction is not out of left field.

In fact, as far as volatility in the market goes, investors should expect a lot more of it. With the “very high degree of uncertainty we’re facing right now, I think we were probably due for a return to higher levels of volatility, and that’s what we got,” Mark Hamrick, chief economic analyst at Bankrate.com, told Fortune.

Among stocks seeing a boost Monday were Amazon, Facebook, Citigroup, and JPMorgan, all rising over 1%.

Rising infections

Top of mind for investors Monday was news of coronavirus spikes in several states across the U.S. like Arizona and Texas (and in China, which is seeing the largest daily increase in cases since mid-April, Bloomberg reported). And even as states reopen, some officials like Governor Andrew Cuomo have been critical about lax attitudes towards social distancing: Cuomo said Sunday there had been 25,000 complaints about violations of reopening standards, sparking fears the reopening may be stymied by reinforced restrictions.

Yet for many states that initially avoided the high infection rates seen in states like New York and New Jersey, the spike may be part of the 1st wave. In that sense, “It’s more appropriate to say this is still the first wave,” suggests Hamrick.

Investors are on edge about the spikes, but Richardson suggests “The market is used to thinking nationally. They don’t think about what’s going on at the local level, and so I think there’s an unfamiliarity in how to interpret local conditions when it comes to a health crisis,” she says. In that sense, she doesn’t “think the market is doing a great job at interpreting what these upticks mean for a national economic rebound, and there’s a disconnect there.”

Stocks did see a boost midday after the Fed announced it will now buy individual corporate bonds on the secondary market—a step that comes after the Fed declared it would buy corporate-bond exchange-traded funds earlier this year. “This is yet another sign the Fed is going to do everything under their power to help liquidity. Worries over a second wave? No worries, the Fed is here,” LPL Financial’s Ryan Detrick wrote on Monday.

Some investors, at least, jest there is no limit to what the Fed is willing to do to bolster the recovery.

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