U.S. stocks climbed sharply higher Tuesday afternoon, bouncing back from Monday’s slump led by the technology sector. Gains were extended after upbeat readings on activity in the U.S. services sector for September and as COVID-19 cases fall following a summer surge.
What are major indexes doing?
- The Dow Jones Industrial Average rose 460 points, or 1.5%, to about 34,463.
- The S&P 500 advanced 66 points, or 1.5%, to 4,367.
- The Nasdaq Composite rose 247 points, or 1.7%, to 14,503.
On Monday, a tech sector led selloff knocked the Nasdaq down by 2.1%, leaving it 7.3% below its record finish set on Sept. 7. The Dow Jones Industrial Average fell 324 points, or 0.9%, while the S&P 500 declined 1.3%.
U.S. stocks were bounding higher Tuesday afternoon as investors found some value in tech stocks after Monday’s slump, which had dragged the Nasdaq Composite over 7% from its Sept. 7 peak, while rising oil l and natural-gas prices helped energy stocks.
U.S. economic data from the Institute for Supply Management Tuesday may have helped provide investors confidence to buy the dip, as it points to economic growth that could sustain the bull market, according to Lauren Goodwin, economist and portfolio strategist at New York Life Investments.
The Institute for Supply Management said its services index rose to 61.9 in September from 61.7, coming in above forecast. A reading of more than 50 indicates an expansion in activity.
“Despite some of the risks that we’re seeing, corporate and economic fundamentals are quite constructive for markets,” Goodwin told MarketWatch Tuesday. “That’s positive evidence of the recovery story and can help assuage investors’ fears that the recovery is faltering.”
Investors have been grappling with whether the economic recovery will unfold under a “goldilocks” scenario in which the supply-chain disruptions moderate over time and the rise in inflation ends up being transitory, according to Goodwin.
Tech stocks have struggled since Federal Reserve Chairman Jerome Powell indicated last month that the central bank could soon start the tapering of bond purchases and complete it by mid-2022. That helped bring forward expectations for interest rate increases which can be a negative for fast-growing companies as it makes their future cash flows less valuable and in turn makes the popular stocks appear overvalued.
“Tech stocks were most vulnerable for a pullback in recent months, as the sector was priced to perfection, or in some cases, priced well above perfection, and as a result, investors are reassessing the risk-reward trade-off of their portfolio’s tech holdings,” said David Bahnsen, chief investment officer at The Bahnsen Group, a Newport Beach, Calif.-based asset manager with more than $3 billion in assets under management.
But Dan Ives, a tech sector analyst at Wedbush Securities, says the sector is being unfairly punished.
“We continue to believe this pressure on the tech sector is short-lived with our belief that tech stocks will be up 10%+ into year-end as the tech growth stories are being massively underestimated by the Street in our opinion with [third quarter] earnings a major positive catalyst for the tech sector looking ahead,” said Ives.
However, U.S. Treasury Secretary Janet Yellen said Tuesday that the U.S. would fall into another recession if Congress doesn’t doesn’t move quickly to raise the debt limit. Yellen last week warned that the Treasury Department was likely to exhaust extraordinary measures to keep from defaulting on its debt by Oct. 18 if Congress hasn’t acted to raise or suspend the debt limit.
Fed Vice Chair for Supervision Randal Quarles is due to speak on the Libor transition.
Also in Washington, D.C., former Facebook employee Frances Haugen testified before a Senate subcommittee, saying in prepared testimony that the social-media giant gave priority to profits over safety. Haugen detailed her allegations in a “60 Minutes” interview that aired on CBS Sunday night.
Facebook shares fell nearly 5% Monday, with its troubles compounded after the social-media platform’s services experienced unprecedented outages for more than six hours Monday. Facebook shares were up 2% Monday afternoon.
Which companies are in focus?
- Johnson & Johnson said Tuesday it has submitted an amendment to the emergency use authorization it’s seeking from the U.S. Food and Drug Administration for a booster shot of its COVID-19 vaccine with additional data showing it increased protection to 94% against moderate to severe or critical COVID-19 in the U.S. Shares rose 0.8%.
- Shares of PepsiCo Inc. were up 1%, after the snack and beverage giant reported third-quarter profit and revenue that beat expectations, while gross margins declined, and provided an upbeat full-year outlook.
- A federal jury awarded $130 million in damages to former Tesla Inc. employee Owen Diaz, finding the company subjected him to a racially hostile work environment and failed to take reasonable steps to prevent him from being racially harassed. Tesla shares were down 0.8%.
- Shares of Lordstown Motors Corp. fell more than 11% after the electric-vehicle maker was downgraded to underweight from equal weight by analysts at Morgan Stanley, who cut their price target to $2 a share from $8.
What are other markets doing?
- The yield on the 10-year Treasury note rose about 4 basis points to around 1.52%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index a measure of the currency against a basked of six major rivals, was up 0.2%.
- Oil futures rose, with the U.S. benchmark up about 2% at $79.13 a barrel. after ending Monday at a nearly seven-year high. Gold futures fell less than 1%.
- Bitcoin topped $50,000 Tuesday, for the first time since early September. The crypto changed hands in recent trade at
- In Europe, the Stoxx Europe 600 closed 1.2% higher while London’s FTSE 100 advanced 1%.
- The Hang Seng Index closed 0.3% higher in Hong Kong, while Japan’s Nikkei 225 dropped 2.2%. Markets in China remain closed for a holiday.
—Steve Goldstein contributed to this article.