U.S. stocks are set to rebound on Wednesday as investors once again made bets on a strong economic recovery from the pandemic.
Dow Jones Industrial Average futures gained 130 points, or 0.4%. S&P 500 futures added 0.5%, while Nasdaq futures gained 0.8%.
Shares of Intel led premarket gains, up nearly 5% after the chip giant unveiled plans for a comeback, saying it was opening two new factories to manufacture its own chips and ones for other companies.
The Dow lost more than 300 points on Tuesday, dragged down by a late-day 3% drop in Caterpillar’s stock, amid concern about rising new coronavirus cases in the U.S. and abroad. The S&P 500 fell 0.8% with major losses from airlines and cruise lines. The small-cap benchmark Russell 2000 fell 3.58%, for its worst day since June.
Cruise lines and airlines were rebounding in the premarket Wednesday, however, with shares of Carnival and United Airlines higher by more than 2%. Energy stocks also rebounded as oil prices bounced.
Tom Lee of Fundstrat Global Advisors said that his clients have been worried about rising Covid cases in Europe, but he believes the sell-off Tuesday was more about end-of-quarter portfolio rebalancing and superstitious investors taking profits one-year after the market’s lows. He’s still betting on stocks that will benefit most from an economic rebound, comparing today to past post-war periods.
“Post war, cyclical companies become the new growth stocks,” Lee told CNBC. “That’s what happens. It happened in Iraq and the Middle East. It happened in Japan. It happened in Korea after the Korean War. It happened in the U.S. after World War II and the Korean War. This is a post-war environment.”
Many regions of the world are indeed seeing rising Covid-19 cases as highly contagious variants continue to spread, the World Health Organization said. Germany and France are extending or enforcing new lockdown measures.
But the pace of vaccinations in the U.S. is picking up with nearly one in five adults now fully vaccinated.
On Wednesday, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen will continue their testimony to the U.S. House Committee on Financial Services. In the first joint appearance Tuesday, the pair acknowledged the richly valued asset prices in the markets, but said that they are not concerned about financial stability.
“I’d say that while asset valuations are elevated by historical metrics, there’s also belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track,” Yellen said during the testimony. “I think that in an environment where asset prices are high, that what’s important is for regulators to make sure that the financial sector is resilient and to make sure that markets work well.”
Powell said that the economic recovery from the pandemic had “progressed more quickly than generally expected and looks to be strengthening.”
However, he said that the sectors of the economy hardest-hit by the pandemic “remain weak” and the unemployment rate “underestimates the shortfall,” so the recovery still had a long way to go.
Treasury yields dipped on Tuesday and continued to fall slightly on Wednesday.
General Mills, Tencent, KB Homes and RH are among the companies reporting earnings on Wednesday.
