U.S. stocks climbed on Wednesday, recouping the losses from the previous session, as investors once again made bets on a strong economic recovery from the pandemic.
The Dow Jones Industrial Average gained 330 point. The S&P 500 added 0.5%, boosted by energy and industrials. The tech-heavy Nasdaq Composite advanced 0.4%.
Classic reopening trades like cruise lines and airlines rebounded after a steep sell-off in the previous session. Shares of American Airlines and United Airlines were higher by more than 3%. Carnival popped 5%, while Norwegian Cruise Line and Royal Caribbean gained 3% each.
“The bull case for equities is persuasive in a recovering economy,” Oliver Brennan, head of research at TS Lombard, said in a note. “Earnings expectations have caught up with the pre-crisis level; risk here remains to the upside.”
Shares of Intel rose 1% after the chip giant unveiled plans for a comeback, saying it was opening two new factories to manufacture its own chips and ones for other companies.
On Wednesday, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen appeared for a second day for virtual Capitol Hill testimony. Talking with member of the Senate Banking Committee, Powell said he expects the economy to experience superior growth in 2021 amid a recovery from the pandemic.
“There’s going to be a very, very strong year in the most likely case,” Powell said. “There are of course risks to the upside and downside, but it should be a very strong year from a growth standpoint…Longer run we do have to raise revenue to support permanent spending that we want to do.”
The market suffered a broad sell-off on Tuesday amid concern about rising new coronavirus infections in the U.S. and abroad.
Tom Lee of Fundstrat Global Advisors said that his clients have been worried about rising Covid cases in Europe, but he believes the sell-off Tuesday was more about end-of-quarter portfolio rebalancing and superstitious investors taking profits one-year after the market’s lows. He’s still betting on stocks that will benefit most from an economic rebound, comparing today to past post-war periods.
“Post war, cyclical companies become the new growth stocks,” Lee told CNBC. “That’s what happens. It happened in Iraq and the Middle East. It happened in Japan. It happened in Korea after the Korean War. It happened in the U.S. after World War II and the Korean War. This is a post-war environment.”
Many regions of the world are indeed seeing rising Covid-19 cases as highly contagious variants continue to spread, the World Health Organization said. Germany and France are extending or enforcing new lockdown measures.
But the pace of vaccinations in the U.S. is picking up with nearly one in five adults now fully vaccinated.