Stocks soared on Tuesday, with the Dow closing up more than 500 points and the
rebounding from its worst three-day decline since September.
The two reasons for the broad rally: no new lockdowns in the U.K., and investors buying the dip carved over the past few weeks.
Dow Jones Industrial Average
rose 561 points, or 1.6%, while the S&P 500 gained 1.8%, and the
On the Omicron watch, the U.K. has opted against new lockdowns—for now. That decision boosted investor confidence a bit, since other countries have already put new restrictions in place.
And the dip buying is on: The S&P 500—flat since early November—had fallen as much as 4% from an all-time high to its low point in that stretch. Several economically sensitive sectors, like oil and banking, were in correction territory only Monday, down more than 10% from their peaks of late. On Tuesday, those two sectors outpaced the S&P 500’s gain.
But the market isn’t fully out of the woods yet. Not only has Omicron sparked fears about global economic activity, but central banks are tightening monetary policy by rapidly reducing the amount in bonds they are buying each month—and looking at lifting short-term interest rates.
Generally, these risks have put market in a volatile mode — and the news Tuesday wasn’t necessarily ground-breaking.
“Stock markets are bouncing back on Tuesday despite there being little of note to trigger the sentiment u-turn as whipsaw price action continues,” wrote Craig Erlam, senior market analyst at Oanda.
Few would quibble about Erlam’s point: Volatility is back. The
Cboe Volatility Index
(VIX) reads 21.5, above the 15 level it fell to at the beginning of November, before market swings became bigger.
The S&P 500’s decline from recent all-time highs—the last two were at the 4,712 and 4,704 index levels—shows that investors are selling stocks at around those levels.
Instinet’s chief market technician, Frank Cappelleri, noted that the index has seen a “double top” pattern. Ideally, a bullish investor would like to see that the index can rise above that top to maintain confidence in the market’s upward direction.
“Markets are adjusting to the reality that it will have to face sporadic headwinds to growth without Pavlovian central bank dovish reactions [stimulus]—and that’s causing a pullback [in general],” wrote Tom Essaye, founder of Sevens Report Research.
Tuesday, though, market participants were moving into riskier assets and out of safer ones.
Asian markets posted solid gains, with the
rising more than 2% following a slump on Monday. European stock indexes were more than 1% higher.
Oil prices started to rebound, with WTI crude oil up more than 4% after it fell more than 3% on Monday.
The price of Treasury bonds fell, with the 10-year yield on U.S. government bonds rising to 1.48% from a 1.43% closing level Monday. That’s the yield’s highest level since Dec. 10.
Here are five stocks on the move:
Micron Technology (MU) rose 11% after the memory-chip company posted strong earnings and provided better-than-expected forecasts for the current quarter.
Nike (NKE) shares rose 6.1% after the sneaker maker posted fiscal second-quarter earnings and sales that topped analysts’ expectations despite persistent supply-chain challenges.
Nikola (NKLA) stock rose 1.8% after agreeing to settle civil fraud charges brought by the Securities and Exchange Commission. Without admitting the charges announced Tuesday, Nikola will pay a $125 million fine to compensate defrauded investors.
General Mills (GIS) stock fell 4% after the company reported a profit of 99 cents a share, missing estimates of $1.05 a share, on sales of $5 billion, above expectations for $4.8 billion.
United Rentals (URI) stock rose 2.1% despite getting downgraded to Neutral from Outperform at Baird.