Stocks rose on Wednesday as Wall Street rebounded from a sharp reversal in the previous session that led the S&P 500 to snap a seven-day winning streak.
The Dow Jones Industrial Average climbed 268 points, or nearly 1%. The S&P 500 gained 1.3% while the Nasdaq Composite advanced 1.8%.
Sentiment was lifted in part by President Donald Trump saying late Tuesday that the U.S. government will purchase 100 million doses of Moderna’s experimental coronavirus vaccine, which is currently in late-stage human trials. Moderna shares rose 0.7%.
Big Tech recovered some of its sharp losses from the previous session. Facebook, Amazon and Netflix were all up more than 1% while Alphabet advanced 0.8%. Microsoft and Apple gained 1% and 1.3%, respectively.
“There’s a big debate happening in the market right now,” said Yousef Abbasi, global market strategist at StoneX. “Does the tech outperformance continue? Or does hope around a vaccine, a better-than-expected Q2 earnings season and the hope the strong economic data continues to hold up start to justify the idea that some froth should probably come out of tech?”
Abbasi noted the financials sector is one space where investors have “some interesting levers they can pull to actually generate decent performance, particularly if you believe the economy will continue to recover.”
JPMorgan Chase traded 0.3% higher on Wednesday while Bank of America and Citigroup each rose more than 0.2%. The Financial Select Sector SPDR Fund (XLF) gained 0.6% and approached its 200-day moving average.
A return of risk appetite following encouraging economic numbers and hopes of new coronavirus relief package and even a vaccine boosted the S&P 500 for much of the trading day on Tuesday. However, the S&P 500 ended the day down 0.8% — snapping a seven-day winning streak — as technology stocks dropped.
“A combination of the S&P 500 Index making its first real attempt at an all-time record high after seven straight days of advances, its old leadership — technology and FANNGs — continuing a recent trend of struggling and another day without an agreement nor even renewed talks in DC regarding a new stimulus package finally caught up with the stock market,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “The first signs of trouble today brought a lot of selling by investors anxious to lock-in recent gains.”
Investors are also juggling uncertainty over a second coronavirus stimulus bill. Over the weekend, Trump signed four executive orders to extend some coronavirus aid. Treasury Secretary Steven Mnuchin said Monday the White House is open to resuming coronavirus aid talks with Democrats and putting more relief money on the table to reach a compromise.
However, Chris Verrone of Strategas Research Partners noted that a look under the market’s surface illustrates a picture of strength.
“The fact that small caps continue to lead here … I think that’s encouraging,” Verrone, the firm’s head of technical analysis, told CNBC’s “Squawk Box” on Wednesday. “I know tech gets a lot of attention, but when you look at this market ex-tech, it’s about to make new highs as well. So this is broader under the surface than many people think.”
“Yesterday, for example, 50% of the S&P 500 made a new one-month high,” Verrone added. “That’s a sign that momentum is returning back to the tape.”
The Labor Department released key data on Wednesday that showed core consumer prices rose at a much faster-than-expected rate last month. Core CPI jumped 0.6% in July, while economists expected a gain of 0.2%.
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