By Christine Idzelis and Mark DeCambre
U.S. stock benchmarks closed higher Tuesday, with a surge extending Monday’s sharp gains, as Wall Street focused on early reports that the omicron variant of coronavirus that causes COVID-19 is less severe than originally feared.
How did stock indexes trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.30% rose 492.4 points, or 1.4%, to 35,719.43, powered by gains in Goldman Sachs Group Inc . /zigman2/quotes/209237603/composite GS -1.20% , salesforce.com Inc . /zigman2/quotes/200515854/composite CRM -1.93% , and Microsoft Corp . /zigman2/quotes/207732364/composite MSFT -1.85%
The S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.89% advanced 95.08 points, or 2.1%, to 4,686.75, with the tech, consumer discretionary and energy sectors leading the rally.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -2.72% jumped 461.76 points, or 3%, to 15,686.92.
On Monday, the Dow industrials surged 657 points, or 1.9%, to 35227. The S&P 500 rose 53 points, or 1.2%, to 4592 to get back to its 50-day moving average and the Nasdaq Composite added 140 points, or 0.9%, to 15225.
What drove markets?
Animal spirits took hold on Wall Street, with a brisk rebound under way in stocks as investors sought bargains out of the wreckage of the past few weeks.
It is “a snapback trade,” said Yung-Yu Ma, chief Investment strategist at BMO Wealth Management, in a phone interview Tuesday. A lot of the fear over the omicron variant of the coronavirus is waning and investors see in recent data that “there is still a lot of economic momentum” in the U.S., he said.
Rallies in energy and information technology, areas of the market that have seemed the most beaten down of late, helped propel U.S. stocks higher. The S&P 500’s information technology sector /zigman2/quotes/210600162/delayed XX:SP500EW.45 -2.10% jumped 3.5% Tuesday to close at a record high, according to Dow Jones Market Data. The energy sector /zigman2/quotes/210600521/delayed XX:SP500.10 -1.95% rose about 2.3%, according to FactSet.
“We like energy a lot,” said Anne Wickland, a portfolio manager at Easterly Investment Partners, in a phone interview Tuesday. Oil companies are in good shape in terms of their cash flows and balance sheets, she said, after being “so much more disciplined over the last couple years.”
Investors continue to take the view expressed by Dr. Anthony Fauci, President Biden’s chief medical adviser, that early indications point to omicron being less dangerous than the delta variant.
“We have conviction that the bull market will extend and that stocks remain attractive on a relative basis,” wrote Keith Lerner, chief market strategist for Truist Advisory Services, in a report dated Tuesday.
“We are realistic that returns are likely to be much more modest on the heels of the strongest start to a bull market in history and expect more normal pullbacks relative to the unusually shallow setbacks of the past year,” the strategist wrote.
Further good news on the virus came as GlaxoSmithKline /zigman2/quotes/209463850/composite GSK +0.49% said Tuesday that new preclinical studies demonstrated that its sotrovimab antibody retains activity against the omicron variant.
“Part of the recovery is no doubt due to growing optimism about the omicron variant, which may be extremely contagious but doesn’t seem to be extremely dangerous,” said Marshall Gittler, head of investment research at BDSwiss Holding.
Also buoying sentiment was China’s decision on Monday to lower reserve requirements for banks as it moved to stimulate a slowing economy that has been weighed down by a slump in the property market.