Stocks jumped for a second day, continuing their rebound from a recent rough patch, as investors grew less fearful of the potential economic impact from the new omicron coronavirus variant.
The Dow Jones Industrial Average rose 492.40 points, or 1.4%, to 35,719.43. The S&P 500 added 2.07% to 4,686.75 and sat about 1% away from its all-time high. The Nasdaq Composite led the market rally, jumping 3% to 15,686.92. It was the best day since March 1 for the S&P 500, and the best day since March 9 for the Nasdaq.
Tech stocks were in relief-rally mode as investors shook off Covid fears and bought the recent dip, pulling the Nasdaq higher. Okta rose 5.7%, while CrowdStrike added 4.9%. Adobe gained 4.4%.
Chipmakers were big winners too, with Intel leaping 3.1% following news that it’s planning to take its self-driving car unit, Mobileye, public in mid-2022. Marvell gained more than 7%, and Nvidia climbed 7.9%. Micron added 4.1%.
Apple shares rose 3.5% as well after a call from Morgan Stanley, which maintained its overweight rating on the stock but heightened its price target on it to $200, citing the company’s commitment to developing augmented and virtual reality technology.
Other mega-cap tech stocks got a lift too, with Microsoft and Amazon up more than 2%. Meta Platforms added 1.5%.
“Time will tell whether investors are getting ahead of themselves but a couple of days without a negative omicron headline has the dip buyers flooding back in,” said Craig Erlam, senior market analyst at OANDA.
This past Friday investors rotated out of tech stocks on those Covid-related fears, and into names linked to the recovering economy. Many market strategists and analysts have called this an overreaction but Erlam urged cautious optimism.
“Given the concern among global leaders and various organizations over the last couple of weeks, I struggle to see all of the updates being as positive which makes more two-way price action a strong possibility,” Erlam added. “A Santa rally may be underway but it will be a bumpy ride.”
Investors were betting that the new Covid-19 strain may cause milder illness than feared, after White House Chief Medical Advisor Dr. Anthony Fauci said Sunday that the initial data on the variant is “encouraging” but that more information is needed to fully understand it.
British drugmaker GlaxoSmithKline also gave investors a confidence boost after it said that its monoclonal antibodies treatment is effective against all strains of the omicron variant, based on new data. Its shares rose 1.3%.
“The market certainly — and this morning is another indication — is kind of looking past the [omicron] variant as something that’s going to be slowing down economic activity, but we’re still not completely out of the pandemic,” David Solomon, Goldman Sachs chairman and CEO, told CNBC’s “Squawk Box” Tuesday.
Energy stocks moved higher as oil prices rise and the outlook for global oil demand recovers. Diamondback and Devon Energy rose more than 6% each, and Occidental Petroleum added 4.2%.
Travel-related stocks, which led the market rally Monday, continued their climb although several turned red going into the close. Still, Wynn Resorts rose 1.8%, Norwegian Cruise Line Holdings edged slightly higher. The Invesco Dynamic Leisure and Entertainment ETF gained 1.6%.
Elsewhere, Tesla shares gained 4.2% despite news that the company had to replace cameras in three of its models. UBS said the electric carmaker will be the dominant force in the industry and raised its price target.
Megan Horneman, director of portfolio strategy at Verdence Capital Advisors, said new monetary easing measures out of the Chinese central bank helped lift the market Monday. Several Chinese tech stocks climbed higher, including Pinduoduo, which surged 12.5%.
The moves follow a comeback on Wall Street in the previous session that saw the blue-chip Dow gain nearly 650 points. The S&P 500 jumped 1.1% with all 11 sectors registering gains. The Nasdaq Composite reversed higher to end the day up 0.9%.
Meanwhile, the market is also weighing the likelihood that the Federal Reserve would begin to remove its massive pandemic easing policies and hike rates sooner than expected.
Comments by Fed officials suggest the central bank is likely to decide to double the pace of its taper to $30 billion a month at its December meeting next week. Initial discussions could also begin as soon as the December meeting about when to raise interest rates and by how much next year.
Market focus will shift to the new inflation data later this week. The consumer price index, which is expected to be even hotter than the prior month, could become the catalyst for the Fed to deliver faster tightening of its policies.
Tech stocks surged Tuesday as investors grew less fearful of the potential economic impact from the new omicron coronavirus variant.