Wall Street shakes off COVID blues, aim for 2nd day of gains


Stock futures were mostly higher on Wednesday, pointing to gains on Wall Street following a session in which investors momentarily cast aside their fears that a resurgence of COVID-19 cases might derail a red-hot economic recovery. 

A batch of encouraging second-quarter earnings on Wednesday from industry bellwethers Coca-Cola (KO), Johnson & Johnson (JNJ) and Verizon (VZ) gave investors reason to focus on the fundamentals. All three companies topped market expectations, converging with sentiment that drove Tuesday’s rally.

JNJ topped estimates, but forecast a slim $2.5 billion in 2021 sales of its COVID-19 vaccine, which has sandbagged by safety concerns and production issues. 

In addition, Netflix (NFLX) and Chipotle (CMG) both posted strong Q2 results. The streaming giant beat analysts’ expectations for new subscribers in the quarter, but fell short of the target for estimates for Q3. Netflix also pulled back more of the curtain on its plans to break into the gaming market. Chipotle also impressed Wall Street by smashing estimates during the quarter, thanks to the mass return of customers after COVID-19 restrictions, and ongoing strength in digital sales.

The week started out with major benchmarks suffering their worst declines of 2021, which took the spotlight from quarterly earnings that have almost uniformly reflected a strong rebound. The rising case count driven by the Delta variant — a more communicable form of COVID-19 — pushed the Dow (^DJI), Nasdaq (^IXIC) and S&P 500 (^GSPC) to their biggest drop in months.

However, investors are reconsidering some of that pessimism, with some analysts pointing out that hospitalizations and deaths haven’t risen as dramatically — and are far below where they were during the worst days of the COVID-19 outbreak. 

Major indices jumped on Tuesday, with the Dow clawing back almost 2% on the day as investors bought the dip. Futures suggest that markets are poised to add to those gains when trading resumes on Wall Street on Wednesday. 

“Whereas a 700-point drop might be a couple of days to get back, we’re seeing it within 24 hours,” Marketgauge.com partner Michele Schneider told Yahoo Finance Live. “That’s just the nature of the fact that the retail investors are so hungry and trained, well-trained, to buy every dip.”

At the same time, bond yields have been on the decline, suggesting that investors are less concerned about inflation — but likely more concerned about growth, and the threat of COVID-19. More specifically, analysts say the threat of new restrictions can’t be ruled out entirely.

“Bond Investors are growing concerned about the threat of renewed lockdowns due to the increase in COVID variants. We have seen at least one county in the U.S. revert to a mask mandate” in Los Angeles, noted Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.

“Other countries like South Africa, Australia and Indonesia are reimposing lockdowns. As a result, investors are seeking the safety of Treasuries if lockdowns threaten growth,” she added.

7:30 a.m. ET: Wednesday: Stock futures mixed

Here were the main moves in markets as of 7:30 a.m.:

  • Dow futures (YM=F): 34,534.00, +134.00 (+0.39%)

  • Nasdaq futures (NQ=F): 14,706.75, -16.00 (-0.11%)

  • S&P 500 futures (ES=F): 4,325.50, +10.00 (+0.23%)

6:20 p.m. ET Monday evening: Stock futures gain

Here were the main moves in markets, as of 6:20 p.m. ET:

  • Dow futures (YM=F): 34,226, +29 

  • Nasdaq futures (NQ=F): 14,727, +5

  • S&P 500 futures (ES=F): 4,319, +3.50

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Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek

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2021-07-21 11:30:14

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