The major Wall Street indices all rose more than 1% as the Dow Jones recovered from its worst day in nine months. Yields on 10-year U.S. Treasuries hit a new five-month low, reversing a 10 basis point decline from the previous session, the strongest since February.
“The bond market has legitimate concerns. But, even with a moderate outlook, there is still plenty of room for equities,” said Jack Ablin, founding partner and chief investment officer at Cresset Capital Management. “The bond market is not calling for a recession, but perhaps a dip in growth expectations. We still believe that the risk-taking on equities is still intact.”
By mid-afternoon, the Dow Jones Industrial Average rose 619 points, or 1.82%, to 34,581.04, the S&P 500 had gained 71.67 points, or 1.68%, to 4,330 , 16 and the Nasdaq Composite added 246.16 points, or 1.72%, to 14,521.14.
The gauge of MSCI stocks around the world gained 0.98%.
“Yesterday’s narrative that bled throughout the weekend was a bit of a risky scenario around increasing COVID cases,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “I don’t think investors are so worried about the cases themselves. It is government officials and their reaction, where we might find ourselves in a situation where restrictive measures are put in place again, which is holding back growth. long-term. ”
After their worst sell this year on Monday, the European STOXX 600 added 0.2%, down from highs reached earlier in the session on corporate earnings and miner production updates.
In a separate measure of investor risk appetite, bitcoin fell below $ 30,000 for the first time since June 22.
The riskiest assets globally have come under pressure recently as many countries struggle to contain the outbreak of the fast-spreading Delta virus variant, raising fears that further lockdowns and other restrictions will upend the crisis. global economic recovery.
A fully vaccinated senior assistant to U.S. House of Representatives Speaker Nancy Pelosi has tested positive for COVID-19, Pelosi’s assistant Drew Hammill said on Tuesday.
The Delta variant is responsible for more than 80% of new cases of COVID-19 in the United States, but vaccines authorized in the country are still more than 90% effective in preventing hospitalizations and deaths, according to the leading US infectious disease expert Anthony Fauci said at a hearing in the US Senate.
As a sign of lingering fears over the spread of the Delta variant, the Australian dollar / Swiss franc crossover, the currency market’s preferred proxy for betting on economic recovery, fell to its lowest level since December 2020 at 0.6714 francs, according to data from Refinitiv.
The US dollar hit a three-month high on Tuesday as investors continued to flee to safety.
The dollar’s gains come as yield spreads have shifted against it.
By mid-morning, the dollar index, a measure of its value against six major currencies, rose 0.2%, after hitting its highest level three months earlier in the session.
In Europe, the German 10-year rate, the benchmark for the euro zone, briefly fell to -0.427%, reaching a new low since February.
Graph – Dividend Yield vs Bond Yield:
Oil prices turned positive as investors sought to buy lower.
US crude recently rose 1.78% to $ 67.60 a barrel and Brent was at $ 69.55, up 1.36% on the day. Spot gold fell 0.2% to $ 1,809.62 an ounce.
(Reporting by Jessica DiNapoli in New York; additional reporting by Tom Arnold in London, Kane Wu in Hong Kong, Sujata Rao and Andrew Galbraith; Editing by Giles Elgood, Lisa Shumaker, William Maclean)
By Jessica DiNapoli