Dow jumps 400 points, Nasdaq pops 4%, but Wall Street is still headed for a losing week

Stocks jumped Friday, as investors looked to steer the S&P 500 away from official bear market territory and bounce back from a week of sharp losses.

The Dow Jones Industrial Average rose 330 points, or 1%, after being up as much as 545 points as it looked to break a six-day losing streak. The S&P 500 gained 2% and the Nasdaq Composite added 3.4%.

Despite those gains, the major averages were on track to post losses for the week. The Dow is down more than 2% and currently on pace for its first 7-week losing streak since 2001. The S&P 500 has fallen 2.5% and is on course for its longest weekly losing streak since 2011, while the Nasdaq has slipped about 3% this week.

"Just as trees don't climb to the sky, prices don't fall forever," said Sam Stovall, chief investment strategist at CFRA. "Even in corrections and approaching bear markets, they tend to experience relief rallies, which is what the markets appear to be starting today."

All the S&P 500 sectors moved higher on Friday led by gains in consumer discretionary and information technology. It was a broad-based comeback with about 93% of the S&P 500 in the green.

American Express, Nike and Salesforce rose more than 3% each, leading the Dow higher.

Beaten-up tech stocks also made a comeback/ Meta Platforms and Alphabet added 3%, while Tesla jumped 5.4%. Semiconductors Nvidia and AMD also popped 9% as Apple rose 3% after becoming the last Big Tech name to fall into its own bear market on Thursday.

Following strong gains on Thursday, heavily shorted meme stocks AMC Entertainment and GameStop jumped 5% and 7.7%, respectively.

Meanwhile, Twitter shares plunged 10.9% after Elon Musk announced a standstill in the takeover deal as he awaits more details on the platform's fake accounts. In other news, Robinhood popped 24.8% after crypto CEO Sam Bankman-Fried acquired a stake in the company.

The stock market has been slumping for months, starting with high-growth unprofitable tech stocks late last year and spreading to even companies with healthy cash flows stocks in recent weeks. The decline has wiped much of the rapid gains stocks enjoyed off their pandemic lows in March 2020.

So far, the S&P 500 and Dow have avoided bear territory but Friday's rally does not mean the markets are out of the woods just yet, said Ryan Detrick of LPL Financial.

"There probably isn't too much more downside risk in our opinion but we could have one more whoosh lower," he said, adding that bear markets on average tend to bottom around the 23% to 25% mark when there isn't a recession.

One reason that stocks have struggled in recent months is high inflation, and the Federal Reserve's attempts to contain prices by raising rates. Fed Chair Jerome Powell told NPR on Thursday that he couldn't guarantee a "soft landing" that brought down inflation without causing a recession.

Though stocks enjoyed a two-week rally after the Fed's first rate hike in March, those gains were quickly erased by a brutal April and the selling has continued in May. There are some signs, such as investor sentiment surveys and some stabilization in the Treasury market this week, that the market could be near, but many investors and strategists say the market may need to take another sizable step down.

"You're getting this market that really is begging for a bottom, for a relief rally. But, at the end of the day, there really hasn't been a capitulation day," said Andrew Smith, chief investment strategist at Delos Capital Advisors.

On the earnings front, Affirm shares soared 28% on the back of a better-than-expected earnings report.

Friday's moves followed a volatile session that saw the S&P 500 and Dow bounce off their intraday lows but still fall 0.1% and 0.3%, respectively. The S&P closed down more than 18% from its high while the Nasdaq squeaked out a gain of less than 0.1%.

The tech-heavy Nasdaq is already in a bear market, down more than 27% from its all-time high.