U.S. stocks climbed Wednesday afternoon, on pace toward ending a two-day losing streak, as investors looked past concerns that rising COVID-19 infections around the world could slow economic growth.
What are major indexes doing?
- The Dow Jones Industrial Average DJIA was up 259 points, or 0.8%, to 34,080.
- The S&P 500 SPX rose 26 points or 0.7%, to about 4,161
- The Nasdaq Composite COMP increased 100 points, or 0.7%, to 13,884.
- The Russell 2000 RUT, +2.02% of small-caps was up 2%.
Stocks had fallen Tuesday for a second day, with the Dow DJIA, +0.79% shedding 256.33 points, or 0.8%. The S&P 500 SPX, +0.70% dropped 0.7%, while the Nasdaq Composite COMP, +0.80% lost 0.9% and the small-cap Russell 2000 RUT, +2.02% slumped 2%.
What’s driving the market?
U.S. stocks on Wednesday were on pace to halt a 2-session skid, with small-cap stocks as favorites, as the reopening trade regained momentum.
“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. NFLX, -7.77% miss late Tuesday, from other high-growth companies facing a broader U.S. economic reopening as more of the population becomes fully vaccinated.
“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 a team led by 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 JNJ, +0.09% 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 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.”
“Look at Netflix,” Calcagni said in an interview. “Look at the bitcoin mini-crash. Look at the airlines — their earnings were very disappointing. I think a reassessment is occurring and I think that’s healthy. Right now we’re at peak everything. It doesn’t mean we can’t go higher from here but it is going to be harder.”
Corporate earnings season has hit full swing, but with disappointments results from Netflix late Tuesday sending shares of the streaming giant down more than 7% Wednesday afternoon.
With markets being priced close to perfection, “any kind of blemish” can weigh down stocks, Kristina Hooper, Invesco’s chief global market strategist, told MarketWatch Wednesday in a phone interview. But “we’re on the cusp of what I think is going to be a strong economic recovery in the U.S.,” Hooper said, which should continue to support stocks after a recent shift in investor sentiment.
Which companies are in focus?
- Netflix NFLX, -7.77% late Tuesday reported 3.98 million net new paid subscribers in the first quarter, down from 8.5 million reported in the previous quarter and well below the 6 million the company predicted three months ago. Shares were down 7.4% Wednesday.
- In deal news, Middleby Corp. MIDD, +7.82% said Wednesday it had agreed to acquire Welbilt Inc. WBT, +42.07% in an all-stock deal with an enterprise value of $4.3 billion, that would create a food equipment company with a commercial food service portfolio. Wellbilt shares soared 42.2% Wednesday.
- Government-services provider Maximus Inc. MMS, -0.64% said Wednesday it had agreed to acquire the privately held parent company of Veterans Evaluation Services Inc. for $1.4 billion. Shares of Maximus were down less than 1% Wednesday.
- “Software robot” company UiPath PATH, +21.79% made its public debut Wednesday at $65.50, or 17% above its initial public offering price of $56 a share, raising more than $1.3 billion and giving the company an initial market capitalization that tops $35 billion. Shares listed on the New York Stock Exchange under the ticker “PATH.”
- Halliburton Co. HAL, -3.58% shares were 4.3% lower after the oil services company swung to a first-quarter profit that beat expectations and revenue that topped forecasts.
- Baker Hughes Co. BKR, +0.03% reported a first-quarter loss but an adjusted profit that beat expectations, while revenue fell just shy of forecasts as oil-field services and equipment revenue dropped 30%. Shares were 0.3% lower Wednesday.
- Shares of Anthem Inc. ANTM, +0.45% were about 0.8% higher after reporting first-quarter profit that beat expectations and providing an upbeat full-year outlook, though revenue missed expectations as premiums rose less than forecast.
How are other assets performing?
- The yield on the 10-year Treasury note BX:TMUBMUSD10Y was flat around 1.57%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, -0.10%, a measure of the currency against a basket of six major rivals, was down about 0.1%.
- Oil futures CL.1, -2.10% CLM21, -2.46% slid on prospects of diminished global demand from COVID-19, with the U.S. benchmark down $1.32 cents, or 2.1%, to settle at $61.35 per barrel, the lowest in about a week.
- Gold futures GC00, +0.88% gained 0.8%, or $14.70, to settle at $1,793.10 an ounce, a 2-month high.
- In Europe, the Stoxx 600 SXXP, +0.65% closed up 0.7% and London’s FTSE 100 UKX, +0.52% rose 0.5%.
- In Asia, Hong Kong’s Hang Seng Index HSI, -1.76%, closed 1.8% lower, while the Shanghai Composite SHCOMP was virtually unchanged and Japan’s Nikkei 225 NIK dropped 2%.
William Watts contributed reporting