Dow rises 285 points for 2nd straight daily gain as focus shifts away from growth worries to earnings season

Stocks are on the mend following pullbacks from record highs.

  • The Dow Jones Industrial Average climbed 285 points to extend a relief rally on Wednesday.
  • The S&P 500 also rose and the Nasdaq Composite pushed through early weakness.
  • Johnson & Johnson was among the Dow stocks that raised its annual earnings guidance.
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US stocks closed higher Wednesday, led by blue-chips as many corporate behemoths upgraded financial guidance, though questions linger about global economic recovery as COVID-19 infections rise.

The Nasdaq Composite overcame earlier weakness while the Dow Jones Industrial Average soared 285 points to advance for a second straight day of gains. The Dow was helped by shares of Coca-Cola, Johnson & Johnson and Verizon which rose after each company raised their financial guidance and posted quarterly results that beat analyst expectations.

Stocks extended Tuesday’s rebound from a rout in the previous session that was triggered by reports about mounting coronavirus cases worldwide. Retail investors buying the dip in shares on Monday purchased a record $2.2 billion of equities.

Wednesday’s “trade is a natural reaction to such a violent move on Friday and on Monday… but I’d steer clear of drawing any conclusions that say in today’s trading, “All is well,” Keith Buchanan, senior portfolio manager at Globalt Investments, told Insider. “We still have to see a lot more from a data perspective to reassure this market that the reopening and progress towards the new normal of economic conditions and consumer behavior are still on track.”

Here’s where US indexes stood at 4:00 p.m. on Wednesday:

Investors have been skittish about COVID-related developments, including a stall in vaccination rates in the US while the highly transmissible Delta variant of the coronavirus is responsible for an estimated 83% of all new cases, according to the Centers for Disease Control and Prevention.

Also key for the direction of markets is the outlook on inflation given that consumer and wholesales prices have shot up to multi-year highs.

“It’s paramount that investors have a clear understanding of what corporations are dealing with from a supply-shortage standpoint and how that’s developing, what they’re having to pay in order to get their products out to market,” and other cost factors including labor and whether they can pass price increases to their customers, said Buchanan.

Around the markets, Cathie Wood has added to her bitcoin exposure with another purchase of shares in the Grayscale Bitcoin Trust after the cryptocurrency fell below $30,000 on Tuesday. Meanwhile, legendary investor Jeremy Grantham said the stock and cryptocurrency markets are in bubbles worse than in 2000.

Ulta will open mini-shops at 100 Target stores next month, the biggest cosmetics retailer in the US said Wednesday.

JPMorgan Chase handed Jamie Dimon a stock award potentially worth millions if he stays CEO for at least five more years.

Gold slipped by 0.3%, to $1,804.30 per ounce. Long-dated US Treasury yields edged up, with the 10-year yield at 1.28%.

Oil prices jumped, pushing past weekly US data showing an unexpected climb of 2.1 million barrels in crude supplies. West Texas Intermediate crude rose 4.3%, to $70.31 per barrel. Brent crude, oil’s international benchmark, gained 4.2%, to $72.25 per barrel.

Bitcoin surged 6.6%, to $31,763.61.

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Reopening stocks from airlines to cruise operators are getting hammered as Delta strain drives surge of infections

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Airline stocks struggle Monday.

  • Shares of cruise operators and airlines were hit Monday as COVID-19 infections ramp up worldwide.
  • Carnival, American Airlines and Expedia were among the stocks that slumped on worries of new virus infections.
  • The CDC on Monday warned travelers to avoid going to the UK because of rising infections.
  • See more stories on Insider’s business page.

Shares of airlines, cruise operators and other travel companies slumped Monday during a selloff set off in part on mounting cases of COVID-19 infections worldwide, highlighting concerns about recovery in the industry and in the global economy.

American Airlines lost 4.4% and cruise operator Carnival fell 5.4% as part of a broader slide in US stocks that saw the Dow Jones Industrial Average plunge by more than 900 points during the session. On the Dow, airplane maker Boeing moved 5% lower.

Expedia Group, the online travel bookings site which also runs and Trivago, gave up 2.5% and hotel chain Marriott declined 3%.

Meanwhile, Carnival, Norwegian Cruise Line Holdings fell 6% and Royal Caribbean Cruises lost 4.6% after a US appeals court ruled late Saturday that cruise restrictions put in place during the pandemic could continue in Florida, according to the Associated Press.

Travel stocks were hit as countries worldwide report rising infections of coronavirus from the Delta variant, which health experts say is the most transmissible strain yet. Infections in the US were rising in all 50 states, with Los Angeles County, the largest in the country, reimposing indoor mask mandates. Delta Air Lines declined 3.7% and Southwest Airlines gave up 2.5%, weighing on the US Global Jets ETF which fell 3.9%. COVID-19 cases have surpassed 190 million.

The headwinds battering travel stocks also helped drive a plunge in oil prices, which are being hit with supply and demand concerns as OPEC+ over the weekend agreed to boost crude output.

“Jet fuel demand will struggle as international travel is not happening anytime soon, especially given how several Americans are struggling to get their passports renewed even with expedited services. Even domestic travel to Hawaii is losing appeal given the limited availability for car rentals, lack of hospitality workers, and extreme price hikes for lodging and dining,” said Ed Moya, senior market analyst at Oanda, in a note.

On Monday, the US Centers for Disease Control and Prevention advised Americans against traveling to the UK because of the spread of COVID-19 in the country.

The UK recorded more than 50,000 new cases for the first time in six months on Friday. Travel stocks there on Monday dropped after the UK government said fully vaccinated travelers entering from France must still quarantine, a move made as French cases increase. France on Sunday posted a third day of more than 10,000 new infections.

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Peloton drops as Wedbush downgrades the fitness company on concerns gym reopenings will boost competition

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  • Peloton shares pulled back 5% on Wednesday after a downgrade to neutral from Wedbush.
  • The company is facing headwinds from gym reopenings and further competition from at-home fitness companies.
  • The 12-month price target was cut to $130 from $115.
  • See more stories on Insider’s business page.

Peloton shares fell Wednesday following a ratings downgrade to neutral at Wedbush, which sees the company facing slower demand as more options for exercise become available with the economy reopening.

Shares of Peloton lost as much as 5.4%, hitting $113.33 before paring the decline to 4.4%.

The rating was dropped from outperform and a 12-month price target was lowered to $115 from $130, implying a potential decline of more than 11% in Peloton’s share price.

The high-end fitness equipment and services company is heading into the next leg of its growth story and it will need to stoke business through savvy marketing and by offering compelling new products to combat competition from other companies, said Wedbush in a Wednesday note.

After the peak of the coronavirus pandemic, gyms are reopening and people have more choices in how to exercise outside of their homes including free options such as running.

“During this transition, we think a neutral rating makes sense until (1) we have better visibility on where underlying demand growth will shake out in the post-pandemic environment and (2) we have better visibility on what investors will be willing to pay for this growth,” said James Hardiman, a Wedbush analyst covering the leisure sector.

The stock year-to-date has dropped about 24% but remains higher by 81% over the past 12 months. Peloton’s business has grown during the COVID-19 pandemic as mass lockdowns forced millions of people to work and exercise at home.

Wedbush has been tracking customer engagement data from social media platforms, Google trends, and Peloton’s own metrics, and in the June quarter, year-over-year growth has substantially decelerated, it said.

That “should not be surprising given seasonal and reopening headwinds, but nonetheless would seem to mark a turning point for a company that has continually defied gravity since its IPO, and presents evidence that the law of large numbers is finally catching up,” said Hardiman.

Peloton in late June said it would offer discounted products and services through a new corporate wellness program, an announcement that propelled the stock to build on gains following a Bloomberg report that the company was pushing into the wearables market.

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The S&P 500 has rebounded 76% since its lowest point in the pandemic crash one year ago today. 2 experts unpack an unprecedented year filled with virus-driven volatility.

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  • The S&P 500 reached its lowest point in the coronavirus-induced market crash exactly one year ago today.
  • Insider spoke with two experts to unpack a volatile year that saw the benchmark index swiftly rebound to new record highs.
  • The analysts say Fed policy and stimulus drove the market rally, but those factors also contributed to investor speculation in 2020.
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One year ago today, the S&P 500 reached its lowest point in the coronavirus-induced market crash. The benchmark index bottomed out at 2,237 on March 23, 2020, following some of the largest down days in market history.

On March 16, the S&P 500 dropped 12%, the same day the stock market’s “fear gauge,” -the Cboe VIX volatility index- closed at a record high. Insider spoke with two analysts to unpack a rollercoaster year for financial markets.

“There was almost a sense of numbness to the continued volatility, but because of the uniqueness of the crisis, there was also a real sense of ‘how low can we go?'” said Ross Mayfield, a Baird investment strategy analyst. “It was also coupled with the panic in the real world – grocery shelves were ransacked, the streets were empty, and there was a real fear amongst most people I talked to.”

Megan Horneman, director of portfolio strategy of Verdence Capital Advisors, said her team tried to focus on the buying opportunity presented instead of worrying about the collapse of the financial markets at the height of the crash last year.

“We added equity exposure and credit exposure throughout March 2020 because we knew the government would be pumping trillions of dollars into the economy to get us through the self-inflicted recession,” she told Insider.

Unprecedented fiscal and monetary relief in March 2020 saved the “health crisis from becoming a financial crisis,” Mayfield said. At the height of the market panic, the Federal Reserve enacted an emergency rate cut, dropping its benchmark index rate to zero while launching a $700 billion asset purchase program. Meanwhile, Congress passed the $2.2 trillion pandemic relief stimulus, the CARES Act.

By early June, the S&P 500 was back within a few percentage points of all-time highs.

“The surprise was in the strength of the rebound,” Mayfield said. “Almost everyone figured it had to crash again or retest the lows, and it just never did (even as the pandemic worsened into the summer).”

While the S&P 500 saw a healthy rebound, investors also began to pour their cash into more speculative assets. Horneman said one of the most surprising parts of the market rebound was witnessing how “massive liquidity can fuel speculation.” She cited the GameStop rally and bitcoin’s nearly 800% run-up as two examples of cash-fueled investors stepping out further on the risk curve in 2020.

Horneman has now seen a shift in market sentiment. While the initial rebound was driven by low rates and stimulus, now stocks have been guided by optimism around the rollout of the vaccine and reopening of the economy. This can be seen by the rotation from stay-at-home tech stocks into stocks that hinge on a reopening, like travel and entertainment names.

The S&P 500 has now gained 76% since its lowest point one year ago. The analysts expect the next leg of the rally to continue to be supported by stimulus and accommodative policy from the Fed, but they also see economic growth driving the market higher.

“In the end the most supportive factor will be the reopening of the global economy. We have the cure, the vaccine,” said Horneman.” Once we can reopen the global economy we will be left with massive stimulus, healthy corporate and consumer balance sheets and substantial pent up demand. This should lead to a multi-year acceleration in economic growth.”

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Most institutional investors say the market is underestimating COVID-19’s long-term impact on the economy, a Natixis survey finds

A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York
A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York.

  •  A new Natixis Investment Managers survey of  500 institutional investors found that 8 in 10 say the market is underestimating the pandemic’s long-term impact on the economy.
  • The results reveal a stark contrast to calls from more bullish voices, like Wharton’s Jeremy Siegel who says the economy and stock market will be stronger than expected in 2021.  
  • The survey also highlighted the sectors investors anticipate will outperform in 2021, and the areas they’re most concerned about heading into next year.
  • Visit Business Insider’s homepage for more stories.

Eight in 10 institutional investors say the market is underestimating the COVID-19 pandemic’s long-term impact on the economy, and 79% don’t expect a full economic recovery until 2022 or 2023.

That’s according to the recently released Institutional Investor Outlook survey from Natixis Investment Managers. The firm surveyed 500 institutional investors who collectively manage more than $13 trillion in assets in 29 countries. 

The survey results reveal a stark contrast to more bullish calls on the economy, like Wharton’s Jeremy Siegel who says the economy and stock market will be stronger than expected in 2021.  

The S&P 500 continues to break new records, but over three quarters of investors are wary of assuming that run will continue- 78% of institutional investors say current market growth is unsustainable, while 95% see the potential for a market correction in at least one sector. 

Read more:The equities chief at $1.4 trillion Franklin Templeton says stocks are ‘priced for perfection’ – but investors still shouldn’t wait to get in. He tells us 9 ways they can get the market-beating returns.

According to Natixis, investors are most concerned over a correction in real estate, technology, and cryptocurrency. 

However, technology and healthcare are two sectors investors expect to outperform in 2021. 66% expect technology to outperform in 2021, while 65% expect healthcare to exceed expectations. But investors anticipate more beaten-down sectors of the market, like real estate, financials, and industrials to continue to underperform.

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