Dow jumps more than 200 points as reopening plays rebound
US stocks climbed on Wednesday, making up for losses from the previous session as investors again bet on a strong economic recovery from the pandemic.
The Dow Jones Industrial Average rose 230 points as Caterpillar rose more than 3%. The S&P 500 gained 0.7% due to energy and industry. The tech-heavy Nasdaq Composite was down 0.9% as Big Tech underperformed.
Classic reopening businesses like cruise lines and airlines rebounded after a heavy sell-off in the previous session. American Airlines and United Airlines stocks were up more than 3%. Carnival gained 5% while Norwegian Cruise Line and Royal Caribbean both gained 3%.
“The bull case for stocks is convincing in a recovering economy,” said Oliver Brennan, head of research at TS Lombard, in a note. “The profit expectations have reached the pre-crisis level. The risk here remains directed upwards.”
Oil prices rebounded more than 6% and increased energy stocks. EOG Resources and Marathon Oil each gained more than 5%, while Diamondback Energy rose 6%.
On Wednesday, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen appeared for a second day to virtually testify on Capitol Hill. Speaking to members of the Senate Banking Committee, Powell said he expected the economy to see superior growth in 2021 amid the recovery from the pandemic.
“It will most likely be a very, very strong year,” said Powell. “There are risks to the upside and downside, of course, but it should be a very strong year in terms of growth … In the longer term, we need to increase revenue to support the sustained spending we want to do.”
Intel stocks reversed previous gains and traded slightly lower, even after the chip giant revealed plans for a comeback. T.The company said it would open two new factories to make chips for your own use and for other companies.
The market suffered a widespread sell-off on Tuesday as concerns about rising coronavirus infections in the US and abroad re-increased.
Fundstrat Global Advisors’ Tom Lee said his clients were concerned about the increasing cases of Covid in Europe, but he believes Tuesday’s sell-off had more to do with the portfolio realignment towards the end of the quarter and superstitious investors a year after took profits at the lows of the market. He is still betting on stocks that will benefit the most from an economic recovery compared to previous post-war periods.
“After the war, cyclical companies become new growth stocks.” Lee told CNBC. “This is what happened. It happened in Iraq and the Middle East. It happened in Japan. It happened in Korea after the Korean War. It happened in the US after World War II and the Korean War. This is a post-war environment . “”
In many regions of the world there are actually increasing Covid-19 cases as highly contagious variants continue to spread World Health Organization said. Germany and France are extending or enforcing new lockdown measures.
However, expectations of a successful reopening in the US remained high as the pace of vaccination in the country accelerates and almost one in five adults is now fully vaccinated.
The 10-year yield on government bonds remained constant at around 1.64% on Wednesday.
– CNBC’s Jeff Cox contributed to the coverage.