Key averages rebounded on Tuesday as investors stepped in to buy the decline from the worst day on the Dow Jones Industrial in eight months.
The comeback rally picked up steadily during the session as a rebound in government bond yields allayed some concerns that a Covid resurgence would slow economic recovery.
At the last count, the Dow Jones Industrial Average rose 580 points, or 1.7%, after falling 725 points on Monday. It was the Dow’s biggest jump in more than a month. The S&P 500 was up 1.5% and the Nasdaq Composite was up 1.4%. The small cap benchmark Russell 2000 index rose 2.8%.
Many of the stocks, which were hardest hit on Monday due to concerns about the Delta variant of Covid-19, rebounded on Tuesday. American Airlines and Delta Air Lines gained 3% and 4% respectively. Royal Caribbean was up 3% after falling 4% on Monday.
Bank stocks are also rebounding as investors continue to monitor bond yields under pressure. JPMorgan, Citigroup and Bank of America are all up more than 2%.
Energy and industrials – two of the hardest hit groups on Monday – also shot back. Exxon Mobil and Chevron were both up 1%. General Electric and Honeywell gained more than 3%.
Wall Street suffered a sharp sell-off on Monday as investors feared the fast-spreading delta coronavirus variant could hamper economic recovery. The blue-chip Dow plunged 2.1%, its worst day since October 28th last year. The S&P 500 was down 1.6% and the Nasdaq Composite was down about 1.1%.
“We remain constructive on equities and see recent growth and slowdown fears premature and exaggerated,” Dubravko Lakos-Bujas, head of US equity strategy at JPMorgan, wrote in a statement on Tuesday. The strategist raised his price target for the S&P 500 from 4,400 to 4,600 at the end of the year, which corresponds to a gain of 8% compared to the closing price on Monday.
Traders continue to watch the 10-year government bond yield, which appears to be driving movement in the equity markets. It fell to a 5-month low on Monday, adding to concerns about the slowing global economy and helping to push stocks down, and fell briefly to 1.128% early Tuesday. It was above 1.78% in March and its decline amid the recovering economy has puzzled and worried investors.
With the rebound on Tuesday, the S&P 500 is only 2% below its record hit last week. During Monday’s losses, the stock benchmark traded below its 50-day moving average at times. However, the index closed above this important technical level on Monday, an optimistic sign for traders that anticipated Tuesday’s rally.
CNBC’s Jim Cramer said Monday’s sell-off drove out some of the speculators who are taking too much risk in stocks this year and it would end soon.
“Once the speculators are blown out … and stocks that have already fallen sharply start rallying, we can find tradable bottom,” said Cramer. “We’re close, but the speculators aren’t completely crushed yet.”
Bitcoin fell below the $ 30,000 mark overnight, triggering sales on cryptocurrencies and another sign that speculation may be coming out of the markets.
In the USA, new Covid cases are recovering, as the delta variant is spreading mainly among the unvaccinated. According to CDC data, there are an average of about 26,000 daily cases in the US for the past seven days, more than double the average from a month ago.
“Many of the cyclical companies are selling out of fears that Covid will stop the recovery,” said Chris Zaccarelli, CIO at Independent Advisor Alliance. “We do not believe this is the case and are ready to let the sell-off take its course and buy the slump believing that the economy will fully recover and return to its previous growth trajectory, which is what most cyclical companies do in the country brings. ” the airline, travel and leisure industries along with it. “