U.S. stocks are likely to rebound on Wednesday as investors again bet on a strong economic recovery from the pandemic.
Dow Jones Industrial Average futures rose 130 points, or 0.4%. S&P 500 futures rose 0.5% while Nasdaq futures rose 0.8%.
Intel’s shares drove market gains that rose nearly 5% after the chip giant announced plans for a comeback. He opened two new factories to manufacture his own chips and those for other companies.
The Dow lost more than 300 points on Tuesday, as Caterpillar stocks fell 3% late in the day as it worried about the surge in new coronavirus cases in the US and abroad. The S&P 500 fell 0.8%, with airlines and cruise lines taking significant losses. The small-cap benchmark Russell 2000 fell 3.58% on its worst day since June.
However, cruise lines and airlines rebounded on the Wednesday before entering the market, with Carnival and United Airlines shares soaring more than 2%. Energy stocks also rebounded as oil prices rebounded.
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 will 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, according to the World Health Organization. Germany and France are extending or enforcing new lockdown measures.
But the pace of vaccination in the US is picking up, with nearly one in five adults now fully vaccinated.
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen will continue their testimony before the US House Committee on Financial Services on Wednesday. When they first appeared together on Tuesday, the pair acknowledged the highly valued asset prices in the markets but said they are not concerned about financial stability.
“I would say that while the valuation of assets is increased by historical metrics, there is also a belief that with rapid vaccinations the economy can get back on track,” Yellen said during the testimony. “I think in an environment with high asset prices, it is important that regulators make sure that the financial sector is resilient and that markets are functioning well.”
Powell said the economic recovery from the pandemic “has advanced faster than generally expected and appears to be strengthening”.
However, he said the economic sectors hardest hit by the pandemic “remain weak” and the unemployment rate “underestimates the deficit,” so the recovery still has a long way to go.
Government bond yields fell on Tuesday and continued to decline slightly on Wednesday.
General Mills, Tencent, KB Homes and RH are among the companies posting profits on Wednesday.
