Wall Street closes sharply higher on revived economic optimism

Wall Street ended sharply higher on Tuesday, rebounding from a multiday losing streak as a string of upbeat earnings reports and revived economic optimism fuelled a risk-on rally.

The Dow Jones Industrial Average rose 549.95 points, or 1.62 percent, to close at 34,511.99; the S&P 500 gained 64.57 points, or 1.52 percent, to 4,323.06; and the Nasdaq Composite Index added 223.89 points, or 1.57 percent, to 14,498.88.

All three major US stock indexes gained more than one percent with the blue-chip Dow, on the heels of its worst day in nine months, leading the charge.

The S&P notched its first advance in four days as well as registering its strongest day since March. The Nasdaq posted its first gain in six sessions.

“It’s a buy-the-dip mentality coming into the market,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

Economically sensitive small caps and transports outperformed the broader market.

Benchmark US Treasury yields bounced back from five-month lows, in the wake of their biggest single-session decline since February in the prior session. This helped boost rate-vulnerable banks by 2.6 percent.

“The economically sensitive stocks are up today,” Carlson added. “When the 10-year [Treasury yield] goes down in a short period of time, that typically doesn’t happen with an economy that’s supposed to be growing. Firming in the 10-year [yield] indicates that perhaps the economy isn’t going to be falling off a cliff.”

Mounting concerns over the highly contagious Delta variant of COVID-19, now responsible for the majority of new coronavirus infections, have sparked selloffs in recent sessions as worldwide coronavirus vaccination efforts gather momentum.

“Things like the Delta variant can certainly impact in the margins,” Carlson said. “It doesn’t take a whole lot of fear in some investors to create what we saw yesterday.”

Of the 11 major sectors in the S&P 500, all but consumer staples closed green. Industrials fared best, rising 2.7 percent.

Second-quarter reporting season has hit full stride, with 56 of the companies in the S&P 500 having posted results. Of those, 91 percent have beaten the consensus, according to Refinitiv.

Analysts now see annual S&P earnings growth of 72.9 percent for the April-June period, a significant improvement over the 54 percent growth seen at the beginning of the quarter.

Halliburton Co rose 3.7 percent after a bounce-back in crude prices boosted oilfield services demand, leading the company to post its second consecutive quarterly profit.

Peloton Interactive Inc advanced 6.7 percent after announcing it would provide UnitedHealth Group’s fully insured members free access to its live and on-demand fitness classes.

Moderna’s stock dropped 2 percent in a volatile session on Tuesday, with the COVID-19 vaccine maker the most heavily traded company on Wall Street ahead of its debut in the S&P 500 on Wednesday.

Netflix Inc shares dipped more than 3 percent in after-hours trading after its forecast missed estimates.

Shares of Chipotle Mexican Grill gained over 2 percent post-market after its earnings and revenue beat the consensus.

Advancing issues outnumbered declining ones on the New York Stock Exchange by a 4.44-to-1 ratio; on Nasdaq, a 3.59-to-1 ratio favoured advancers.

The S&P 500 posted 41 new 52-week highs and no new lows; the Nasdaq Composite Index recorded 45 new highs and 76 new lows.