Snow covers the Charging Bull sculpture in the Financial District of Manhattan, New York, December 17, 2020.
Jeenah Moon | Reuters
U.S. stocks rose on Tuesday to build on the market’s strong rally in February, after a key volatility gauge Wall Street watches declined, which could unleash more buying from quant funds.
The Dow Jones Industrial Average climbed 120 points to an all-time high. The S&P 500 rose 0.4% and the Nasdaq Composite gained 0.5%, both hitting record highs. Energy was the best-performing sector, rising 2.2% as a deep freeze in the South sparked a rally in oil prices and put West Texas Intermediate crude futures above $60 a barrel for the first time in over a year.
The Cboe Volatility Index, widely viewed as Wall Street’s best fear gauge, broke below 20 to settle at 19.97 on Friday, marking the first significant breach of the threshold since the pandemic-induced sell-off began in February 2020.
The crack of the 20 level is viewed by some on Wall Street as a big “risk on” signal, which could trigger buying from algorithmic traders and other big players. The gauge last traded up about one point to 21 on Tuesday morning.
“Fear is receding from the market,” Tom Lee, FundStrat’s co-founder and head of research, said in a note on Friday. “And receding fear is followed by systematic and quant funds adding ‘leverage’ — in other words, this is a set-up to see a rally.” Lee is a CNBC contributor.
On Tuesday, the 10-year Treasury yield topped 1.25% for the first time since March.
The major averages finished last week at record levels even as February’s rally appeared to cool off somewhat. The Dow has gained 4.9% in February, while the S&P 500 and the Nasdaq have rallied 5.9% and 7.8%, respectively. The S&P 500 has raked in ten record closes in 2021.
Easing fears across Wall Street are likely in large part thanks to the rollout of the Covid-19 vaccine, economic reopening and expectations for more fiscal stimulus.
“Covid is far from defeated, but the path toward economic normalization is clearer as more vaccines that reduce hospitalizations and eliminate fatalities are approved,” Dennis DeBusschere, strategist at Evercore ISI, said in an email.
Elsewhere, bitcoin crossed $50,000 for the first time ever Tuesday, continuing its dizzying rally as more companies warmed to the crypto space.
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