U.S. stocks rebounded on Wednesday as investors once again made bets on a strong economic recovery from the pandemic.
The Dow Jones Industrial Average gained 230 points, or 0.6%. The S&P 500 added 0.5%, while the tech-heavy Nasdaq Composite advanced 0.4%.
Shares of Intel led the gains, up more than 5% 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.
Cruise lines and airlines also recovered some of the losses 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. Energy stocks also rebounded as oil prices bounced.
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.
On Wednesday, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen will continue their testimony to the U.S. House Committee on Financial Services. In the first joint appearance Tuesday, the pair acknowledged the richly valued asset prices in the markets, but said that they are not concerned about financial stability.
“I’d say that while asset valuations are elevated by historical metrics, there’s also belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track,” Yellen said during the testimony. “I think that in an environment where asset prices are high, that what’s important is for regulators to make sure that the financial sector is resilient and to make sure that markets work well.”
Powell said that the economic recovery from the pandemic had “progressed more quickly than generally expected and looks to be strengthening.”
However, he said that the sectors of the economy hardest-hit by the pandemic “remain weak” and the unemployment rate “underestimates the shortfall,” so the recovery still had a long way to go.
Treasury yields dipped on Tuesday and continued to fall slightly on Wednesday.