US stocks rebounded on Tuesday as investors rushed to buy stocks that had been knocked down in Monday’s sell-off.
The rally suggested that even though the Delta variant of the fast-spreading coronavirus casts a shadow over the economic outlook, many investors still view the stock market as the best place to put their money.
The Dow Jones Industrial Average climbed 568 points, or 1.7%, after falling more than 700 points on Monday in its worst session since October. The S&P 500 gained 1.5%, while the tech-rich Nasdaq Composite rose 1.6%.
Stocks, bond yields and oil prices fell on Monday as investors focused on the potential of the Delta variant, rising inflation and strained U.S.-China relations to weigh on the global economic recovery. A rise in consumer prices could cause the Federal Reserve to reverse its easy money policies sooner than expected.
Despite this, the three major stock indexes each closed on Monday only about 3% lower from their all-time highs, underscoring the strength of the recovery that fueled stock markets in the first half of the year.
The S&P 500 rose 15% in 2021 and the Dow industry added 13%.
“In a lot of our conversations with our clients, people were really trying to find time to put money to work,” said Mike Stritch, Chief Investment Officer, BMO Wealth Management. “People are stepping in and they don’t want to get caught missing out on an opportunity to buy a few points lower. “
All 11 sectors of the S&P 500 rose on Tuesday, led by financial and industrial groups. Travel stocks were among the top performers, with Norwegian Cruise Line Holdings up 7.2% and American Airlines Group up 6.1%.
One factor that could support further equity gains is improving expectations for corporate earnings. The forecast has risen since the start of the earnings season last week, with analysts now forecasting S&P 500 company profits to rise 71% in the second quarter from a year earlier, at a time when a large part of the economy had been crippled by the pandemic.
“You really need the fundamentals, the earnings, to really bounce back, and that’s really what we’re seeing,” said Larry Adam, chief investment officer at Raymond James. “If you get that momentum, then people worry less about ratings.”
Stocks trade at higher multiples of their projected earnings than the long-term average. If earnings continue to beat expectations, it would make stocks cheaper at current prices.
Among individual stocks, HCA Healthcare shares climbed 15% and were set to hit a new all-time high after the healthcare operator saw a sharp rebound in second-quarter earnings and raised its profit forecasts.
In bond markets, the yield on the benchmark 10-year US Treasury bill edged up to 1.210%, after falling to 1.181% on Monday in its largest single-day decline since March. Yields rise as bond prices fall.
Oil prices edged up after falling a day earlier over concerns that Covid-19 could once again dampen energy demand. Brent crude rose 0.8%, after falling 6.8% on Monday in its worst daily percentage performance since March.
“We sometimes forget that when we’ve had periods of really strong performance and low volatility, the little bumps in the market make it look like they’re bigger than they are,” said Shaniel Ramjee, manager of multi-asset funds at Pictet Asset Management.
Cryptocurrencies continued their decline, with bitcoin falling below $ 30,000 for the first time in nearly a month. The digital currency was down 3.6% to $ 29,684 from its 5 p.m. ET level the previous day, according to CoinDesk.
Overseas, the pancontinental Stoxx Europe 600 rose 0.5%. In Asia, most major benchmarks extended Monday’s declines. The Shanghai Composite Index fell 0.1% and the Hong Kong Hang Seng fell 0.8%.
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