U.S. stocks ended Wednesday higher, with the tech-heavy Nasdaq scoring an all-time record, as investors focused on stocks that can outperform amid an acceleration of coronavirus infections in about 30 American states and longer periods of working from home.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.05% rose 177.10 points, or 0.7%, to end at 26,067.28, after trading as high as 26,109.49 at the start of the session. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.40% climbed 24.62 points, or 0.8%, to finish at 3,169.94. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.13% added 148.61 points, or 1.4%, closing at a fresh 10,492.50 record, it’s 25th of the year.
On Tuesday, the Dow tumbled 396.85 points, or 1.5%, to end at 25,890.18; the S&P 500 index shed 34.40 points, or 1.1%, closing at 3,145.32 and ending a 5-session win steak; while the Nasdaq Composite Index fell 89.76 points, or 0.9%, to finish at 10,343.89, after carving out an intraday 10,518.98 record on Monday.
Year-to-date the Dow is down 8.66%, the S&P 500 down 1.88% but the Nasdaq Composite is up 16.94%.
What drove the market?
Equity markets booked gains Wednesday, even as investors focused on the question of whether unabated increases in COVID-19 cases in a number of U.S. states would delay economic recovery.
The U.S. reported 60,000 new coronavirus cases Tuesday, a single-day record, according to data compiled by Johns Hopkins University. The seven-day average for cases is higher than the 14-day average, an indication that the spread is intensifying, according to a Wall Street Journal analysis of the publicly available health data.
“The single-day spike kind of woke some investors up,” Lindsey Bell, Ally Invest’s chief investment strategist, told MarketWatch. Bell also expects the approaching corporate earnings reporting season in mid-July to provide reason for optimism, if only by showing the worst damage from the crisis has passed.
“Earnings expectations are still pretty dire, but it looks like the second-quarter will be the bottom, and that there will be improvement in the third and fourth quarter, even if there are double-digit declines,” she said. “Investors are hopeful that 2021 is going to be a heck of a lot better than 2020.”
Overall, more than 3 million coronavirus cases have been confirmed in the U.S. along with at least 131,857 deaths, the largest national toll in the world. Texas and Florida have become the epicenters of the recent resurgence, with Florida reporting 7,361 cases on Tuesday and Texas recording more than 10,000 infections—the highest one-day increase in infections thus far.
Since early May, growing optimism around the U.S. economic restart had been driving a rotation into more cyclical stocks, mainly with an eye toward which companies could benefit from an easing of strict lockdowns: the “reopening” or “return to work” trade.
“That trade has really unwound here,” said Katie Nixon, Northern Trust Wealth Management’s chief investment officer, in an interview. “Investors are getting back to the tried and true stocks that will be supported by a prolonged working-from-home environment.”
Nixon pointed to the outperformance of tech-powerhouse Invesco QQQ Trust /zigman2/quotes/208575548/composite QQQ +2.52% , one of the oldest and most liquid exchange-traded funds, as well as shares of Facebook Inc . /zigman2/quotes/205064656/composite FB +1.47% , Amazon. com Inc . /zigman2/quotes/207159039/delayed XE:AMZ -0.28% , Apple Inc . /zigman2/quotes/202934861/composite AAPL +3.32% , Netlfix Inc . /zigman2/quotes/202353025/composite NFLX +1.83% and Google /zigman2/quotes/205453964/composite GOOG +1.78% /zigman2/quotes/202490156/composite GOOGL +1.80% parent Alphabet as examples.