Stocks climbed as giant tech companies rallied in a shift back to the safety trade that has powered this year’s gains amid speculation the economic recovery will be slow with a virus resurgence.
The S&P 500 rose to the highest since September 2, while the Nasdaq 100 jumped more than 2 per cent. Heavyweights Apple and Amazon surged alongside some stay-at-home shares that were hit hard by this week’s selloff such as Zoom.
The Dow Jones Industrial Average underperformed, and banks slumped. The Russell 2000 Index of smaller stocks halted a two-day rally which was driven by expectations that a return to normal would be on the horizon after positive vaccine developments. Treasury futures were little changed, with the cash market closed for a US holiday. The dollar advanced.
With fears of further economic pain growing amid the threat of tougher measures to contain the virus, traders piled back into companies with solid balance sheets and a suite of products that benefit from social distancing.
New York City’s average of people testing positive for Covid-19 is approaching the safety threshold that would force a shutdown of schools, with the mayor citing one “last chance” to halt a second wave. The pandemic has killed more than 1.2 million people around the world since late January and sent the economy into the worst recession in living memory.
“We are still going to be in for a slower economic growth environment,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management. “We could see some reopening rollback as the Covid case counts continue to climb.”
While the recent rotation into cheaper value stocks slowed down on Wednesday, JPMorgan strategists said the shift into those companies can endure much longer after years of lagging behind growth shares. There’s still room for further normalisation as a large part of the initial rally was driven by the short-covering of short-momentum strategies — which buy the past year’s winners and sell its losers, according to them.
“Our equity strategy team believes that we are on the cusp of a sustained rally in value comparable to what we saw in 2016-2017,” said strategists including Davide Silvestrini and Marko Kolanovic. “This rotation has room to continue much further given the material underperformance we have witnessed in recent years.”
Elsewhere, talks between Opec and its allies are zeroing in on a delay to next year’s planned oil-output increase of three to six months, according to several delegates. Saudi Arabia and Russia, leaders of the 23-nation coalition, have already indicated publicly that they are reconsidering easing production cuts in January as the resurgent pandemic hits fuel demand.
These are some of the main moves in markets:
Stocks
- The S&P 500 gained 0.8% as of 4pm New York time.
- The Stoxx Europe 600 Index climbed 1.1%.
- The MSCI Asia Pacific Index advanced 0.6%.
Currencies
- The Bloomberg Dollar Spot Index climbed 0.2%.
- The euro decreased 0.4% to $1.1771.
- The Japanese yen depreciated 0.1% to 105.44 per dollar.
Bonds
- Germany's 10-year yield fell two basis points to -0.51%.
- Britain's 10-year yield rose one basis point to 0.413%.
Commodities
- The Bloomberg Commodity Index advanced 0.1%.
- West Texas Intermediate crude advanced 0.1% to $41.41 a barrel.
- Gold weakened 0.7% to $1,863.29 an ounce.
