The major averages rebounded sharply on Tuesday following three days of losses amid fears about the fast-spreading Covid omicron variant.
The Dow Jones Industrial Average gained 560.54 points, or 1.6%, to 35,492.70, helped by gains in Nike and Boeing. The S&P 500 jumped nearly 1.8% to 4,649.23 as nine of the 11 sectors registered gains. The technology-focused Nasdaq Composite added 2.4% to 15,341.09. The small-cap benchmark Russell 2000 climbed 2.9% for its best day since July 20.
Reopening plays, like airlines, cruise lines and entertainment stocks, saw some relief buying on Tuesday. Delta Air Lines rose 5.9%, United Airlines gained nearly 6.9% and Carnival added about 8.7%. Las Vegas Sands surged 8.4%. Boeing rallied 5.8%.
President Joe Biden said in a Tuesday address that people with booster shots are “highly protected,” urging Americans to get their extra doses. The president reiterated that the U.S. is not going back to March 2020 at the height of the initial outbreak where the country went into a forced lockdown.
Biden said his administration will deploy 1,000 medical personnel from the military to back up hospitals if they face a wave of omicron patients in January and February. The White House is also purchasing 500 million at-home Covid tests that Americans can order for free through a website starting next year.
Stocks came back from a three-day losing streak spurred by the omicron surge that accounted for 73% of new infections in the U.S. last week, federal health officials said Monday. The S&P 500 notched its worst three-day stretch since September on Monday.
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“The market seems to be reacting to a short-term oversold position,” said Timothy Lesko, principal at Granite Investment Advisors. “Omicron and its unknown effect is creating significant volatility. Bonds were over bought, stocks were over sold and now we seek to find answers.”
“If omicron-induced illness remains mild, which seems to be of some debate, we could see a rally,” Lesko added.
Micron shares surged more than 10% after the memory-chip maker posted much better than expected earnings for the prior quarter and gave bullish guidance. NXP Semiconductors gained 3%, and Advanced Micro Devices added 6.2%.
Nike shares jumped 6.1% after the sneaker maker reported quarterly earnings and sales that exceeded analysts’ expectations, despite ongoing supply chain pressures. Other retailers like Gap, Dick’s Sporting Goods and Macy’s also gained.
The 10-year Treasury yield rebounded to nearly 1.5% after concerns regarding omicron slowing the recovery dragged it down as low as 1.36% late last week. Oil bounced back to above $70 a barrel, settling at $71.12. This spurred a rebound in energy names like Devon Energy, ConocoPhillps and Chevron.
The omicron surge has kept investors on edge with the variant now found in at least 43 U.S. states and 90 countries. Officials with the World Health Organization said omicron is more contagious than any previous variant of Covid-19.
The blue-chip Dow dropped more than 400 points for its third straight declining session on Monday. The S&P 500 and the Nasdaq Composite both declined more than 1% Monday. The Dow lost nearly 1,000 points over the previous three sessions.
“As we head into the shortened holiday week amid surging omicron cases, continued supply chain pressures and the failure of the Build Back Better plan, increased volatility and thinner trading volumes could cause the market to overreact, which could be a buying opportunity in the run-up to Christmas,” said Mark Hackett, Nationwide’s chief of investment research.
Investors also assessed the prospects for Biden’s economic agenda. The Senate will vote on Biden’s sweeping social safety net and climate policy bill in January, despite Democratic Sen. Joe Manchin’s opposition to it. It is unclear if Democrats will try to pass a smaller bill that includes only parts of the full package.