Before The Bell - The third time was apparently the charm. To wit, after the stock market fell for three days in succession, with steep setbacks last Thursday and then again on Tuesday of this week, Wall Street reversed course yesterday morning and did so in a big way. Thus, after this modest string of losses that saw the Dow surrender more than 1,500 points over the aforementioned three days and the tech-heavy NASDAQ fall into correction territory (defined as a loss of more than 10%), the buyers came back in droves yesterday morning, and by the noon hour the averages were all up strongly en route to a wire-to-wire win.
Specifically, as the afternoon began, the Dow was ahead by some 550 points and the NASDAQ was better by over 300 points. Major tech names were leading the way higher, including Tesla (TSLA), which rebounded by 8% at mid-session. However, the airlines were facing headwinds in the sky after United Airlines (UAL) cut its third-quarter scheduled capacity forecast as well as the passenger revenue target. Shares of other airlines fell, too, on demand concerns. Boeing (BA) stock also was lower as air carriers delayed plane purchases. For the most part, though, the stock market continued to press higher.
Meanwhile, as impressive as this comeback was, some pundits were warning that there was more selling in the tech names to come, as valuations still were stretched. But for one day at least, the bulls were ascendant, with notable share recoveries in such Dow names as Apple (AAPL), Microsoft (MSFT), and composite newcomer Salesforce.com (CRM). Encouragingly, the gains continued to come as the afternoon moved along.
As for news, there was little of note to explain the rebound, although there might have been some sense that equities had corrected sufficiently in the prior three days to spark some buying. Meantime, what news there was did not excite investors, especially on the COVID-19 front, where vaccine hopeful AstraZeneca (AZN) affirmed that it was putting its Phase 3 trial on hold on a safe and effective formula. The stock, not surprisingly, fell back in trading. But such issues were the exception, as the rest of the market kept climbing with the Dow up more than 650 points at 1:30 PM (EDT).
The rest of the afternoon saw a plateauing of the advance, with the blue chips holding onto gains of 600 points, or more, until the final few minutes when there was some selling to take the averages back down a little. Still, it was a strong session, in total, with the Dow adding 440 points, the S&P 500 climbing 67 points, and the NASDAQ advancing 294 points. Also, at the close, Tesla shares had risen by almost 11% after a several-session selloff, while some of the usual tech stalwarts, such as Amazon.com (AMZN) did well. The NASDAQ's ability to stay above its 50-day moving average was also supportive.
Finally, oil prices rebounded after a several-day selloff. Gold prices also rose. A new day is upon us, and to get a glimpse of whether yesterday's comeback rally will extend itself, we look to the futures, which now are suggesting a modestly higher opening when trading resumes this morning. – Harvey S. Katz, CFA