U.S. stocks climbed sharply higher Tuesday afternoon, bouncing back from Monday’s slump led by the technology sector. Gains were extended after upbeat readings on activity in the U.S. services sector for September and as COVID-19 cases fall following a summer surge.
What are major indexes doing?
-
The Dow Jones Industrial Average
DJIA,
rose 460 points, or 1.4%, to about 34,463. -
The S&P 500
SPX,
advanced 64 points, or 1.5%, to 4,365. -
The Nasdaq Composite
COMP,
rose 239 points, or 1.7%, to 14,494.
On Monday, a tech sector led selloff knocked the Nasdaq down by 2.1%, leaving it 7.3% below its record finish set on Sept. 7. The Dow Jones Industrial Average fell 324 points, or 0.9%, while the S&P 500 declined 1.3%.
What’s driving the market?
U.S. stocks were higher Tuesday afternoon as investors found some value in tech stocks after Monday’s slump, which had dragged the Nasdaq Composite over 7% from its Sept. 7 peak, while rising oil
CL00,
and natural-gas prices
NG00,
helped energy stocks.
U.S. economic data from the Institute for Supply Management Tuesday may have helped provide investors confidence to buy the dip, as it points to economic growth that could sustain the bull market, according to Lauren Goodwin, economist and portfolio strategist at New York Life Investments.
The Institute for Supply Management said its services index rose to 61.9 in September from 61.7, coming in above forecast. A reading of more than 50 indicates an expansion in activity.
“Despite some of the risks that we’re seeing, corporate and economic fundamentals are quite constructive for markets,” Goodwin told MarketWatch Tuesday. “That’s positive evidence of the recovery story and can help assuage investors’ fears that the recovery is faltering.”
Investors have been grappling with whether the economic recovery will unfold under a “goldilocks” scenario in which the supply-chain disruptions moderate over time and the rise in inflation ends up being transitory, according to Goodwin.
Tech stocks have struggled since Federal Reserve Chairman Jerome Powell indicated last month that the central bank could soon start slowing its bond purchases and complete tapering by mid-2022. That helped bring forward expectations for interest-rate increases, which can be a negative for shares of fast-growing companies as their future cash flows appear less valuable as a result.
“Tech stocks were most vulnerable for a pullback in recent months, as the sector was priced to perfection, or in some cases, priced well above perfection, and as a result, investors are reassessing the risk-reward trade-off of their portfolio’s tech holdings,” said David Bahnsen, chief investment officer at The Bahnsen Group, a Newport Beach,…
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