By Avantika Chilkoti, Alexander Osipovich and Joanne Chiu
U.S. stocks recovered ground Friday, following the biggest rout in the stock market since mid-March.
The Dow Jones Industrial Average gained 684 points, or 2.7%, in morning trading, clawing back some of its losses a day after Thursday's 6.9% tumble.
The S&P 500 climbed 2.2%, while the Nasdaq Composite rose 2.1%. All three indexes are poised to close the week lower, snapping a three-week winning streak.
Before Thursday's jarring halt, U.S. stocks had rallied in recent weeks to erase most of this year's losses. The optimism reflected in equities has been at odds with the reams of data signaling that the pace of the global economic recovery following the coronavirus pandemic is likely to be slow and uneven, with the threat of a second wave of infections that could dim prospects further.
A fear of missing out on the rebound in equities, optimism about the technology sector's prospects, the wall of cheap money unleashed by policy makers so far, and confidence the central banks will take more steps to shield major economies from the worst of the fallout have prompted the steep ascent in stocks since the end of March.
Some of those factors may be back in play Friday, or markets may be seeing a temporary rebound, investors said.
"We can't discount the fact that there is a lot of money sitting on the sidelines," said Brian O'Reilly, head of market strategy for Mediolanum International Funds. "It's a trading market at the moment -- more than a long-term fundamentals market -- so on any setback like yesterday, you're likely to see people come in and bid the market higher."
Norwegian Cruise Line Holdings, Carnival and American Airlines -- some of the worst-performing stocks this year as tourism ground to a halt -- all rose more than 12%.
Boeing, one of the worst performers Thursday, gained 10%. Hertz gained more than 50% after the bankrupt auto rental company said it wants to sell as much as $1 billion in stock to take advantage of its recent rally.
U.S. consumers have grown more optimistic as states and cities have moved to reopen their economies, according to a closely watched gauge of consumer sentiment released Friday. The University of Michigan's index reading for June came in at 78.9, up from 72.3 last month.
Treasury Secretary Steven Mnuchin said Thursday that the government is weighing a second round of stimulus payments for Americans. That would help prop up spending and plug household budgets, adding to the $267 billion distributed by the Internal Revenue Service so far this year.
Following Thursday's selloff, President Trump criticized the Federal Reserve for its gloomy economic forecasts and predicted a strong second half to the year. Those comments were in response to Fed Chairman Jerome Powell's projections on Wednesday that the economy faced a potentially long road to full recovery, and the labor market may face more hurdles.
Overseas, the pan-continental Stoxx Europe 600 was up 0.9% in recent trading. In Asia, Hong Kong's Hang Seng Index retreated 0.7%, while the Shanghai Composite ended the day largely flat.
The stance of the Fed -- which also signaled its willingness to offer more support to the economy and credit markets -- and its counterparts represented a major support for markets, despite Thursday's selloff, according to Ken Peng, head of Asia investment strategy at Citi Private Bank.
"There's just too much cash sitting around for this to be a deep correction," Mr. Peng said. "The Fed and other major central banks have already made it very clear they're there to buy the bottom basically," he said.
The yield on the 10-year Treasury note ticked up to 0.697%, up from 0.651% on Thursday. Bond yields rise as prices fall.
Oil prices ticked higher. Futures on Brent crude, the global oil benchmark, gained 1.7% to $39.22 a barrel, a day after sharp losses.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com, Alexander Osipovich at email@example.com and Joanne Chiu at firstname.lastname@example.org