Wall Street reverses sell-off despite COVID variant concerns By Reuters

By Jessica DiNapoli

NEW YORK (Reuters) – Wall Street made a comeback on Tuesday with all the major indexes rising, and yields on other safe havens including U.S. Treasuries bounced off lows even as worries remained about a resurgence in COVID-19, spurred by the Delta variant.

Wall Street’s main indexes all rose by more than 1%, with the Dow recovering from its worst day in nine months. Yields on U.S. 10-year Treasuries came off a new five-month low, reversing a 10 basis-point drop from the previous session, the biggest since February.

“The bond market has valid concerns. But, even with the moderated outlook, it still leaves a lot of room for equities,” said Jack Ablin, founding partner and chief investment officer at Cresset Capital Management. “The bond market isn’t calling for a recession, but perhaps a tamping down of growth expectations. We still believe equity risk-taking 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 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.

MSCI’s gauge of stocks across the globe gained 0.98%.

“The narrative from yesterday that bled through the weekend was a little bit of a risk-off scenario around the increasing COVID cases,” said Charlie Ripley, senior investment strategist for Allianz (DE:ALVG) Investment Management. “I don’t think it’s so much that investors are worried about the cases themselves. It’s government officials and their reaction, where we could get into a situation where restrictive measures get put in place again, that dampens growth over the long run.”

After their worst sell-off this year on Monday, Europe’s STOXX 600 added 0.2%, down from highs earlier in the session due to positive corporate earnings and production updates from miners.

In a separate gauge of investor risk appetite, bitcoin fell below $30,000 for the first time since June 22.

Riskier 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 could upend the worldwide economic recovery.

A fully vaccinated senior aide to U.S. House of Representatives Speaker Nancy Pelosi tested positive for COVID-19, Pelosi aide Drew Hammill said on Tuesday.

The Delta variant is the cause of more than 80% of the new COVID-19 cases in the United States, but the authorized vaccines in the country are still more than 90% effective in preventing hospitalizations and deaths, top U.S. infectious disease expert Anthony Fauci said during a U.S. Senate hearing.

In a sign of lingering fears of the spread of the Delta variant, the Aussie dollar/Swiss franc cross, a favorite proxy in currency markets for economic recovery bets, fell to its lowest level since December 2020 at 0.6714 francs, according to Refinitiv data.

The U.S. dollar rose to a three-month peak on Tuesday as investors continued to flee to safety.

The gains in the dollar come as yield differentials have moved against it.

By mid-morning, the dollar index, a measure of its value against six major currencies, rose 0.2%, after hitting the three-month high earlier in the session.

In Europe, Germany’s 10-year yield, the benchmark for the euro zone, briefly fell to -0.427%, breaching a new lowest level since February.

Graphic – Dividend yield vs bond yield: https://fingfx.thomsonreuters.com/gfx/mkt/jnpweggxqpw/Pasted%20image%201626766612409.png

Oil prices turned positive as investors looked to buy a dip.

U.S. crude recently rose 1.78% to $67.60 per barrel and Brent was at $69.55, up 1.36% on the day. Spot gold dropped 0.2% to $1,809.62 an ounce.