U.S. stocks climbed higher Wednesday, helped by banks and reopening stocks as the 10-year Treasury yield climbed higher.
The Dow Jones Industrial Average rose 106 points. The S&P 500 added about 0.3% to touch 4,500 for the first time, and the Nasdaq Composite gained nearly 0.1%.
The yield on the benchmark 10-year Treasury note climbed to 1.332% Wednesday, its highest level since earlier in the month when it yielded as much as 1.364%. That lifted shares of JPMorgan Chase, Bank of America and Wells Fargo about 2%. Regional banks like Zions and Fifth Third added 2% also.
Travel and leisure stocks were higher too. Air carriers and cruise lines broadly added about 1%. Casino stocks Penn National Gaming and Caesars Entertainment gained 6.5% and 3%, respectively. MGM Resorts added 2%.
Markets have been boosted by signs that delta variant cases could be peaking. Fundstrat’s Tom Lee said in a note to clients late Tuesday that the worst may be behind us, citing a falling positivity rate in Florida and Texas.
“We realize equity markets have been choppy and the wide variance of perspective means investors do not have an easy consensus. But our central case remains that we are shifting further into full risk-on, with an ‘everything rallies’ into” year-end, wrote Lee. “The cadence of incoming data has improved in the past few days, the most notable being the apexing of COVID-19 cases in a number of states.”
Johnson & Johnson said on Wednesday that its Covid Vaccine booster shot showed promising results in early stage clinical trials, significantly increasing virus-fighting antibodies.
Delta Airlines said Wednesday it would raise health insurance premiums for unvaccinated employees to cover higher Covid costs. The company has about 75,000 employees and roughly 75% of them are fully vaccinated. On Tuesday Goldman Sachs it will require employees to entering its offices to be fully vaccinated. Delta and Goldman added more 1.5% Wednesday morning.
Wells Fargo Securities head of equity strategy Christopher Harvey also sees more gains on the horizon. He lifted his year-end S&P 500 target to 4,825 on Tuesday, which is 7.5% above where the index finished the day. Harvey’s call is based on its strength through August carrying over into the final months of the year.
“Over the last 31 years, there have been nine instances where the S&P 500 had a price return of 10%+ in the first eight months of the year; over the next four months, the index averaged another +8.4%. None of these instances produced a negative return during those last four months,” he wrote in a note to clients.
Dick’s Sporting Goods shares hit an all-time high Wednesday of $134.80 after reporting strong quarterly earnings before the bell. Nvidia shares rose 2% after the Department of Energy said its new supercomputer will run on the company’s computing platform.
The much anticipated Jackson Hole symposium kicks off on Thursday, where central bankers will potentially provide updates on their plan around tapering monetary stimulus. The Federal Reserve has been purchasing at least $120 billion of bonds per month to curb longer-term interest rates and jumpstart economic growth as the pandemic wreaked havoc on the economy.
Chairman Jerome Powell is slated to make remarks on Friday.
“Taper talk is the worry, but if inflation continues to run hot and economic data continues to be mixed the timing of tapering could get pushed,” noted Lindsey Bell, chief investment strategist at Ally Invest. “It’s unlikely that the Fed will force a taper on an economy that isn’t ready, and the outlook is becoming less certain with the rise of the Delta variant.”
Bell added that the deciding factor could be August’s jobs report due Sept. 3, given that Covid cases have jumped in the past month as the delta variant spreads.
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