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Dip Buyers Emerge After Rout, With S&P 500 Erasing 3% Drop

Katherine Greifeld and Claire Ballentine

(Bloomberg) -- The S&P 500 briefly turned positive in late trading following two days of selling that took the index more than 7% below its all-time high set Wednesday.

The benchmark for American equities was little changed as of 3:28 p.m. in New York, moementarily wiping out all of a 3% decline from the morning. The last time it did that was in March. The index plunged 4% Thursday in the the steepest rout since June.

Dip buyers, one of the most reliable features of the past few years of trading, re-emerged ahead of the three-day holiday weekend. A strong August jobs report may provide some rationale the reversal, but investors have rarely needed anything more than an undying faith that stocks will continue to churn higher as the Federal Reserve pumps money into the financial system.

“When you get these kind of smashes, you get this mad rush for the exits. It looks ugly, but it ends up being short in duration,” said Michael Antonelli, managing director and market strategist at Baird. “I think you start to see not only dip buyers, but the consistent buyers, the ones out there looking at their favorite names.”

While jarring, extreme volatility is nothing new in a year when the coronavirus pandemic, a fierce recession and the ascent of quick-draw retail day traders have turned previously placid markets on their heads. Thursday’s drubbing was the ninth time the Nasdaq 100 has fallen 4% or more since February. In the two years before that, it happened twice.

That dip-buying mindset has repeatedly helped fuel the S&P 500 over 53% higher since March’s lows. When the S&P 500 fell nearly 6% on June 11, it rallied for three straight days. However, stocks needed a full month to completely claw back losses, as that short rally quickly gave way to renewed volatility.

Tech stocks also trimmed losses Friday afternoon after the Nasdaq 100 briefly fell into correction territory, losing as much as 10% in the last two days from its all-time high.

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