Dow jumps 300 factors, led by financial restoration video games, small caps bounce again greater than 2%
US stocks rose Wednesday to rebound from two days of losses as investors piled into stocks most sensitive to the economic rebound.
The S&P 500 rose 0.9% while the Dow Jones Industrial Average gained 300 points. The tech-heavy Nasdaq Composite gained 1%. The 2000 small-cap Russell gained 2.3% and grew 13% in 2021.
Norwegian Cruise Line Holdings’ shares caused a pop on games reopening after Goldman Sachs appreciated the stock. Norwegian jumped more than 7% while Carnival and Royal Caribbean both gained 3%.
United Airlines rebounded 2% after falling 8.5% Tuesday after the airline reported its fifth straight quarterly loss, saying business and international travel are still a long way from recovering.
Netflix shares fell about 8% after the streaming giant reported subscriber additions well below Wall Street estimates as the pandemic’s surge in demand wore off. The company also expects to only gain about 1 million subscribers in the current quarter, which is way below estimates. Roku’s shares fell 3% out of sympathy.
Companies have posted solid quarterly results, but the bar is high to lift the stock market to record highs this year after a strong rally. Additionally, most analysts focus on the prospects companies are ready to give. The Dow and S&P 500 are still up 10% over the year after breaking records on Friday.
“It looks like the economy is now well on its way to recovering. However, earnings forecasts for the start of the current reporting season appear more conservative than our economic forecasts suggest,” said Scott Wren, Wells Fargo’s leading global market strategist .
To date, more than 70 S&P 500 companies have reported, and they have averaged 23% more than analysts’ earnings expectations, according to CNBC calculations.
Wall Street suffered only two losses as the reopening dragged the market down amid renewed concerns about the rising number of new Covid cases around the world. The Dow fell 250 points on Tuesday for its worst daily performance since March 23, while the S&P 500 and Nasdaq fell 0.7% and 0.9%, respectively.
The Cboe Volatility Index, also known as the VIX or Market Fear Indicator, rose for two consecutive days and landed above 18 on Tuesday after hitting a 14-month low last week. The VIX traded a little lower on Wednesday.
“Market volatility has increased amid concerns over the course of the pandemic, inflation concerns and a high-profile earnings disappointment from Netflix,” said Mark Haefele, CIO at UBS, in a note. “As we continue to see spikes in volatility, we expect the market rally to continue and rotation trading to resume.”