Wall Street bounces as tech rebounds
NEW YORK (Reuters) – Wall Street’s main indexes rallied on Wednesday to stanch the bleeding after a three-day drop as investors jumped back in to take advantage of the repricing in technology-related stocks, a day after the Nasdaq confirmed correction territory.
Tesla Inc shares jumped 7.7% after suffering their biggest one-day percentage drop in the prior session, while Apple Inc, Microsoft Corp and Amazon.com Inc – the top three U.S. public companies by market capitalization – each rose by at least 4%.
Other stay-at-home winners such as Facebook Inc and Google-parent Alphabet Inc also climbed, a day after the tech-heavy Nasdaq ended 10% below its Sept. 2 record closing high, commonly known as a correction.
“Call off the five-alarm fire, it’s not here,” said Peter Kenny, founder, Kenny’s Commentary LLC and Strategic Board Solutions LLC in Denver.
“It is very important to realize those mega-cap names have pulled the market higher and higher, so far out of range as of last week that the market did have to come back in to some sort of reversion to the mean.”
Kenny said the Nasdaq’s ability to hold its 50-day moving average, a technical support level, was key in reversing the market’s direction.
In late afternoon trading, the Dow Jones Industrial Average was up 631.27 points, or 2.3%, at 28,132.16, the S&P 500 gained 82.5 points, or 2.48%, to 3,414.34 and the Nasdaq Composite added 313.46 points, or 2.89%, to 11,161.15.
U.S. stocks have become susceptible to volatility as market leadership has narrowed during the year to a handful of heavyweight tech-related stocks as traders bid up their shares in a rally that triggered a Nasdaq-led rebound for Wall Street from its pandemic lows in March.
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The recent pullback has also been driven by worries that sellers of call options would unwind massive amounts of stocks they bought as hedges during the rally.
Media reports last week said SoftBank Group Corp has made big bets on equity derivatives tied to tech firms.
In a sign of growing unease about the positioning in tech stocks, skew, a measure of demand for protective put options in relation to call options, has risen sharply.
Market volatility is expected to further increase in the run-up to the U.S. presidential election, with September and October also historically turbulent months of the year.
In a reversal from the prior three sessions, growth stocks jumped 3% to outperform the 1.7% climb in value stocks on the day.
Market participants were watching for signs of a widening in market breadth, supported by improving economic data.
AstraZeneca Plc could resume trials for its experimental coronavirus vaccine next week, the Financial Times reported, after the British drugmaker paused global trials of its experimental COVID-19 vaccine. Still, its U.S.-listed shares fell 1.5%.
- Short sellers upped positions as stocks recoiled, tech shorts rout winners: S3
Tiffany & Co tumbled 6.2% after French luxury goods giant LVMH warned it was set to walk away from its planned $16 billion takeover of the U.S. jeweler.
Advancing issues outnumbered declining ones on the NYSE by a 3.24-to-1 ratio; on Nasdaq, a 2.19-to-1 ratio favored advancers.
The S&P 500 posted 2 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 30 new highs and 20 new lows.
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