Dow surges 550 points after biggest drop of the year
By Anneken Tappe, CNN Business
Stocks rallied Tuesday, rebounding from a miserable trading session at the start of the week when the Dow logged its worst day since October.
After rising moderately at the New York opening bell, the rally picked up pace for the rest of the session. The Dow closed up 1.6%, or some 550 points, marking its best day in a month. However, the gains didn’t pare all of the 726-point loss the index incurred Monday.
The broader S&P 500 finished up 1.5%, and the Nasdaq Composite closed 1.6% higher. For the S&P it was the best session since March, while the Nasdaq logged its best performance since May.
Investors have grown increasingly worried about rising Covid-19 cases as the more infectious Delta variant of the coronavirus spreads across the globe. Stocks of airlines and cruise operators fell sharply Monday as investors feared what rising infection rates could do to the recovering economy.
Even though the economy has recovered sharply after falling into a hole in the spring of 2020, it is still not back to where it was prior to when the pandemic first hit the United States.
The Back-to-Normal Index created by CNN Business and Moody’s Analytics shows the US economy is at 91% of the its pre-Covid strength. And any renewed restrictions on public life to keep the virus from spreading could knock the recovery further back.
Worse still, Wall Street is also in the middle of earnings season so the next few weeks will be headline-heavy. For wary investors, there is plenty to be concerned about.
“Whether because of policy, economic activity, inflation, or second quarter earnings, the markets are justifiably struggling to identity future growth opportunities,” said John Lynch, chief investment officer at Comerica Wealth Management.
And yet, stocks remain near all-time highs. On July 12, all three major indexes set record highs.
Elsewhere in the market, the worries about a future with Covid-19 have been more visible: Bond yields tumbled as investors poured money into safe-haven US Treasuries.
The 10-year US Treasury bond yield remains depressed at 1.21% around the time of the stock market close. Bond yields have fallen to their lowest level since February. Over the course of the spring and early summer months, Treasury yields had been rising as investors focused primarily on rising inflation as the economy reopened and what that could mean for the Federal Reserve’s easy money policies.
In economic data, June building permits fell short of expectations at nearly 1.6 million, while the number of housing starts in the same month exceeded forecasts at slightly over 1.6 million. This shows that “overall, residential construction is holding up, despite supply chain constraints and a lack of skilled workers,” BMO economist Priscilla Thiagamoorthy, said in a note.
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