Wall Street Rebounds on Wednesday 08/12 15:56
Stocks marched broadly higher on Wall Street Wednesday, briefly nudging the
S&P 500 above its all-time closing high set in February, before the coronavirus
pandemic led to a historic market plunge.
(AP) -- Stocks marched broadly higher on Wall Street Wednesday, briefly
nudging the S&P 500 above its all-time closing high set in February, before the
coronavirus pandemic led to a historic market plunge.
The benchmark index notched a 1.4% gain, its eighth in nine days. It ended
within 0.2% of its record high from Feb. 19, when the coronavirus seemed like
only a far-away worry for Wall Street.
Big technology stocks led the way higher once again. Health care and
communication services stocks also had a strong showing. The rally followed
gains for stocks across Europe and much of Asia, while Treasury yields
continued their sharp increase after a report on inflation came in higher than
expected for the second straight day.
The S&P 500 rose 46.66 points to 3,380.35. The Dow Jones Industrial Average
gained 289.93 points, or 1.1%, to 27,976.84. The Nasdaq composite, which is
heavily weighted with technology stocks, climbed 229.42 points, or 2.1%, to
11,012.24. The Russell 2000 index of small company stocks picked up 8.15
points, or 0.5%, to 1,583.25.
Indexes in Europe closed broadly higher. Asian markets were mixed.
The U.S. stock market is on the edge of erasing the last of the losses taken
after the coronavirus pandemic crushed the economy into recession, even though
the economy is still hobbling despite some recent improvements. In March, the
S&P 500 had been down nearly 34% from its record.
Much of the rebound has been due to massive amounts of support from the
Federal Reserve, which has slashed interest rates to nearly zero and propped up
far-ranging corners of the bond market to keep the economy's head above water.
The ultra-low interest rates mean investors are getting paid very little to own
bonds, which pushes some into stocks, boosting their prices.
Congress has also offered unprecedented amounts of aid, though it's hit a
seeming impasse in negotiations to re-up its assistance.
All that support has investors willing to look a few months or a year into
the future, when a vaccine for the new coronavirus will hopefully be available
and helping the economy get back to normal. More importantly for stock prices,
the expectation is that corporate profits will also rebound from their current
"Economic data is coming in much better than expected; the earnings season
is much better than expected," said Megan Horneman, director of portfolio
strategy at Verdence Capital Advisors. "You couple all of those things with the
massive amounts of fiscal and monetary stimulus taking place. That's why we've
seen the (market) rally so quickly off its low and at the magnitude that we've
Wall Street's gains on Wednesday were widespread, with two-thirds of the
stocks in the S&P 500 higher.
Technology stocks were among the biggest forces prodding the market higher.
It's a return to form for them, following a mini-stumble in recent days.
Big tech-oriented giants like Apple, Microsoft and Amazon have been the
year's biggest winners, carrying the stock market through the pandemic despite
the worries about the economy, on expectations they'll continue to deliver
strong growth regardless of whether people are quarantined.
Tesla jumped another 13.1% Wednesday after announcing a 5-for-1 split of its
stock, in hopes of making the price of each share more affordable to investors.
The stock has surged past $1,400 after starting the year a little below $420.
The yield on the 10-year Treasury rose to 0.67% from 0.66% late Tuesday.
It's jumped sharply since sitting at 0.57% late Monday.
A report on Wednesday showed that inflation remains very low, but it ticked
up more last month than economists expected. Economists debated how much value
the report has, given that inflation is likely to remain weak with the pandemic
flattening the economy.
If inflation were to reappear, it could weaken the Federal Reserve's
commitment to keeping interest rates low and could ultimately draw some
investors away from stocks.
Other risks also continue to loom over the market, including worsening
tensions between the United States and China, which are the world's largest
economies. Technology companies have been in focus in particular, and worries
about potential retaliation by China were a big reason for U.S. tech stocks'
struggles earlier in the week.
Partisan rancor in Washington is also threatening the possibility of more
assistance for the economy. A $600 weekly unemployment benefit from the U.S.
government expired at the end of July, and investors say the economy needs
another big lifeline from Washington. President Donald Trump signed several
executive orders this past weekend to offer some assistance, but critics say
they fall well short of what's needed.
The recent rise in yields has also slowed the supersonic ascent for gold
recently. The metal's price has shot to record highs this year, benefiting from
increased demand by investors looking for safety amid the pandemic but not
interested in the low yields offered by bonds.
Gold for December delivery rose $2.70 to $1,949.00 an ounce a day after
plunging by more than $90 an ounce.
Oil prices rose. Benchmark U.S. crude oil for September delivery rose $1.06
to settle at $42.67 a barrel Wednesday. Brent crude oil for October delivery
rose 93 cents to $45.43 a barrel.