By Christine Idzelis and Joy Wiltermuth
U.S. stocks finished Wednesday higher, ending a two-day losing streak, as investors looked past concerns that rising COVID-19 infections around the world could slow economic growth.
What did major indexes do?
The Dow Jones Industrial Average DJIA added 316.01 points, or 0.9%, to end at 34,137.31, its second-highest close ever.
The S&P 500 SPX rose 38.48 points or 0.9%, ending at 4,173.42, also its second-highest finish on record.
The Nasdaq Composite COMP increased 163.95 points, or 1.2%, closing at 13,950.22, its largest percent gain since April 15.
The Russell 2000 /zigman2/quotes/210598147/delayed RUT -1.13% of small-caps surged 2.4%, finishing at 2,239.63.
Stocks fell Tuesday for a second day , with the Dow /zigman2/quotes/210598065/realtime DJIA -0.24% shedding 256.33 points, or 0.8%. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.47% dropped 0.7%, while the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.21% lost 0.9% and the small-cap Russell 2000 /zigman2/quotes/210598147/delayed RUT -1.13% slumped 2%.
What drove the market?
U.S. stocks on Wednesday halted a two-session skid, with Dow and S&P just shy of records and small-cap stocks outperforming as the investors favor stocks that might benefit from economic recovery as businesses reopen as more of the population becomes fully vaccinated.
“It’s the reflation trade, again,” said Kent Engelke, chief economic strategist at Capitol Securities Management. “One day, it’s like we are going to hell in a handbasket. The next day, it’s like wow, things are looking good.”
Engelke attributed the whipsawing action partially to the rise in algorithmic trading and technology-driven trading, but also to jitters around potential further corporate earnings disappointments, following the Netflix Inc . /zigman2/quotes/202353025/composite NFLX +0.47% earnings miss late Tuesday. “You can’t have earnings disappointments in issues that are trading at such high valuations,” Engelke told MarketWatch. “There is no room for error.”
Pressure earlier this week on the S&P 500 index and Dow followed fresh records on Friday, with analysts largely tying two days of declines to concerns about a renewed rise in COVID-19 infections around the world, particularly in India and Japan.
India reported a record number of cases again on Wednesday, counting more than 200,000 for a seventh straight day. The country’s hospitals are reported to be filling rapidly, it is running out of ICU beds and running low on oxygen. News reports said Japanese officials were considering ordering a state of emergency for Tokyo and Osaka due to surging COVID-19 cases. Ireland’s confirmed COVID-19 deaths have now surpassed those of China.
But Mark Haefele, chief investment officer at Global Wealth Management, UBS AG, still sees buying opportunities in stocks as volatility picks up, particularly since shipments of the Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +0.46% COVID-19 vaccine are set to resume to Europe , after its one-shot dose was paused in the U.S.
“Periods of elevated volatility can present opportunities to generate yield, gradually build up long-term holdings, or gain exposure to markets using asymmetric payoff structures,” the Haefele’s team wrote in a Wednesday note.
“I call this the great re-assessment,” said Don Calcagni, chief investment officer for Mercer Advisors. “A lot of things are forcing market participants to hit the pause button and re-assess, including a rise in COVID cases. We’re also seeing some questionable earnings despite the overall headlines.”