The Dow Jones Industrial Average climbed Wednesday as investors once again made bets on a strong economic recovery from the pandemic. Tech stocks sold off, continuing a market rotation out of high-flying growth names.
The blue-chip benchmark gained 170 points as Caterpillar jumped more than 3%. The S&P 500 traded flat, supported by energy and industrials. The tech-heavy Nasdaq Composite dropped 1.2% as Big Tech underperformed. Apple and Netflix fell more than 1% each, while Facebook slid 2.5%. Tesla slipped 3.6%.
Oil prices bounced back more than 6%, boosting energy stocks. EOG Resources and Marathon Oil popped more than 5% each, while Diamondback Energy climbed 6%. The material and financial sectors also outperformed, rising more than 1% each.
“Stocks encountered volatility but powered ahead in the first quarter. Cyclical stocks — those sensitive to economic momentum — continued to lead,” Tony DeSpirito, chief investment officer of U.S. fundamental equities at BlackRock. “We think it makes sense to position for the start of a new and powerful economic cycle.”
Airline stocks recouped some of the steep losses in the previous session. Shares of Delta and United Airlines were higher by more than 1%.
Shares of cruise operators rolled over, however, after Centers for Disease Control and Prevention said the sailing order limiting cruises will stay in place until Nov. 1. Norwegian Cruise Line dropped 5% following the news, while Royal Caribbean and Carnival fell more than 1%.
On Wednesday, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen appeared for a second day for virtual Capitol Hill testimony. Talking with members 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.”
Shares of Intel reversed earlier gains and traded slightly lower even after the chip giant unveiled plans for a comeback. The firm said it would open two new factories to manufacture chips for its own use and for other companies.
The market suffered a broad sell-off on Tuesday as concern renewed about rising 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.
Still, expectations for a successful reopening in the U.S. remained high as the pace of vaccinations in the country is picking up with nearly one in five adults now fully vaccinated.
“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.”
The 10-year Treasury yield held steady at around 1.64% Wednesday.
— CNBC’s Jeff Cox contributed reporting.