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NEW YORK, Nov. 13 (Reuters) – Wall Street closed higher on Friday with upbeat earnings reports helping spark optimism about the economy as well as hope for COVID-19 vaccines to be successful even as investors were monitoring an increase in virus cases and restrictions in the country.
After a volatile week of trading where the market was whipped between hopes and fears around the virus, Cisco Systems Inc provided the biggest boost to the S&P 500 after its quarterly report showed an increase in work-related demand at home.
Walt Disney Co also advanced as its rapidly growing video streaming business, and a partial recovery in its theme parks, tempered its quarterly loss.
“At least for today, it seems sentiment about the potential of vaccines, combined with very strong earnings announcements from a number of companies, gives investors hope that the economy can continue to recover.” said Michael Arone, chief investment strategist at State Street Global Advisors.
Unofficially, the Dow Jones Industrial Average rose 378.85 points, or 1.3%, to 29,459.02, the S&P 500 gained 46.99 points, or 1.33%, to 3,584 and the Nasdaq Composite a added 113.97 points, or 0.97%, to 11,823.55.
Friday’s outperformance of more economically sensitive sectors, notably energy and industrials, relative to growth sectors like technology, was a clear indication of “optimism for the recovery of the economy.” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.
All three major U.S. stock indexes fell Thursday as more than a dozen U.S. states reported a doubling of new COVID-19 cases in the past two weeks as the mayor of Chicago issued a stay-at-home notice a month.
But a senior adviser to President-elect Joe Biden said there are no nationwide lockdown plans next year and instead spoke of restrictions for specific regions when the virus has spread bad there. .
State Street’s Arone said aversion to a full foreclosure likely encouraged some investors. But he was concerned that investor optimism was being overstated, especially as Fed officials warned of the potential damage the rise in virus cases could do to the economy without a new stimulus package. economic in sight.
“The market underestimates some of the impact that rising cases and lack of stimulus will have on the economy and profits and overestimates the potential timing and scale of a vaccine distribution,” said Arone.
“In the spring, people were bracing for the worst and the worst didn’t happen. Now they’re expecting the best, and maybe they’re a little too rosy.
Positive data from Pfizer’s vaccine study earlier this week prompted a rotation in cyclical sectors, boosting the S&P 500 and the Dow.
However, the high tech Nasdaq underperformed as investors saw profits in tech stocks, which benefited from a home environment.
Globalt’s Martin also highlighted hope for news of further progress in the coronavirus vaccine, after Moderna Inc said earlier this week that it had enough data for a first interim analysis of its late-stage trial. .
With third quarter reports released by around 90% of S&P 500 companies, Refinitiv IBES estimates now show profits down 7.8% from a year ago compared to the Oct. 1 forecast of a down 21.4%.
Meanwhile, Biden’s victory in the battlefield state of Arizona has widened his electoral voting margin, but the official transition remains in limbo as President Donald Trump refuses to concede.
Value stocks, which mainly include cyclical sectors such as banking and energy, outperformed the Growth Index, which is largely made up of technology companies. (Additional reporting by Stephen Culp in New York, Medha Singh and Shivani Kumaresan in Bengaluru; Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Tom Brown)
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