The major averages rebounded on Tuesday following three days of losses amid fears about the fast-spreading Covid omicron variant.
The Dow Jones Industrial Average gained about 350 points, or 1%. The S&P 500 rose about 1%. The technology-focused Nasdaq Composite added 1%. The small-cap benchmark Russell 2000 was up about 1.5%.
Micron shares surged nearly 8% after the memory-chip maker posted much better than expected earnings for the prior quarter and gave bullish guidance.
Stocks are coming back from a three-day losing streak spurred by the omicron surge that accounted for 73% of new infections in the U.S. last week, federal health officials said Monday. The S&P 500 notched its worst three-day stretch sine September on Monday.
“The market seems to be reacting to a short term oversold position,” said Timothy Lesko, principal at Granite Investment Advisors. “Omicron and it’s unknown effect is creating significant volatility. Bonds were over bought, stocks were over sold and now we seek to find answers.”
“If omicron induced illness remains mild, which seems to be of some debate, we could see a rally,” Lesko added.
The omicron surge has kept investors on edge with the variant now found in at least 43 U.S. states and 90 countries. Officials with the World Health Organization said omicron is more contagious than any previous variant of Covid-19.
The blue-chip Dow dropped more than 400 points for its third straight declining session on Monday. The S&P 500 and the Nasdaq Composite both declined more than 1% Monday. The Dow lost nearly 1,000 points over the previous three sessions.
“As we head into the shortened holiday week amid surging omicron cases, continued supply chain pressures and the failure of the Build Back Better plan, increased volatility and thinner trading volumes could cause the market to overreact, which could be a buying opportunity in the run-up to Christmas,” said Mark Hackett, Nationwide’s chief of investment research.
Investors also assessed the prospect for President Joe Biden’s economic agenda. The Senate will vote on Biden’s sweeping social safety net and climate policy bill in January, despite Democratic Sen. Joe Manchin’s opposition to it. It is unclear if Democrats will try to pass a smaller bill that includes only parts of the full package.