Stocks rise on vaccine hopes; S&P 500 back within 5% of high

Markets worldwide rallied on rising hopes for a COVID-19 vaccine Wednesday, and the Standard & Poor’s 500 index climbed back to where it was a few days after it set its record early this year.

Investors see a vaccine as the best way for the economy and human life to get back to normal, and researchers said late Tuesday that one developed by the National Institutes of Health and Moderna revved up people’s immune systems in early testing, as hoped. The S&P 500 rose 0.9% to pull within 4.7% of its all-time high set in February.

The Dow Jones industrial average climbed 227.51 points, or 0.9%, to 26,870.10, and the Nasdaq composite gained 61.92, or 0.6%, to 10,550.49. During the morning, the S&P 500 touched its highest level since Feb. 25, and it ended the day at 3,226.56, up 29.04.

Several things helped lift the market, including stronger-than-expected reports on the economy and on corporate profits from Goldman Sachs and others. But the vaccine hopes were at the center of the rise, which meant the market’s leader board was dominated by companies that would benefit most from a return to normal life. They included cruise-ship operators, airlines, retailers and hotel chains.

Stocks of smaller companies also leaped much more than the rest of the market, an indication of rising expectations for the economy. The Russell 2000 index of small-cap stocks jumped 3.5%, a turnaround from earlier months when big, tech-oriented companies were carrying the market.

Winners of the stay-at-home economy created by quarantines and lockdowns, meanwhile, lagged behind. Clorox, Netflix and Amazon all fell.

Wednesday’s lift for markets, though, came only after another day of choppy trading. The S&P 500 shot to a quick 1.3% gain shortly after trading began, only to give up nearly all of it before swinging a couple more times.

It’s the latest bout of erratic trading for the market, which has been largely churning in place for weeks. The S&P 500 is almost exactly where it was June 8. Often, it has swung sharply within a single day as hopes for a budding economic recovery collide with continuing increases in coronavirus cases.

On Wednesday, as Wall Street was losing its stride, Florida announced another daily death toll of more than 100 and Oklahoma’s governor said he tested positive for COVID-19.

Worries also remain high that the stock market has gone overboard in its rally: It has taken fewer than four months for the S&P 500 to almost return to its record after being down nearly 34%. But it could take years for the economy and corporate profits to get back to where they were before the pandemic struck.

Markets nevertheless climbed Wednesday, bolstered by the optimism about a possible vaccine and encouraging reports on the economy and corporate earnings.

The nation’s industrial production improved more in June than economists expected. So did manufacturing in New York state earlier this month.

Goldman Sachs rose 1.4% after it reported much stronger results for the latest quarter than analysts expected. Financial stocks in general did well, with those in the S&P 500 up 1.9%.

Other areas of the market where profits are closely tied to the strength of the economy were also particularly strong. Industrial stocks rose 2.6% for the biggest gain among the 11 sectors that make up the S&P 500, and energy producers gained 2%.

Royal Caribbean Cruises surged 21.2% to lead a group of stocks that stand to gain if shoppers and travelers get back to life as it was before the pandemic. American Airlines rose 16.2%, Gap jumped 12.7%, Live Nation Entertainment rose 11.7% and Hilton Worldwide added 10.1%.

The yield on the 10-year Treasury rose to 0.63% from 0.61% late Tuesday. It tends to move with investors’ expectations for the economy and inflation.

In Europe, Germany’s DAX returned 1.8%, while the CAC 40 in Paris advanced 2%. Britain’s FTSE 100 rose 1.8%.

In Asia, Tokyo’s Nikkei 225 advanced 1.6% after the Bank of Japan kept its ultra-easy monetary stance unchanged. It forecast that the economy would improve later in the year, assuming there is no major “second wave” of outbreaks of the new coronavirus.

South Korea’s Kospi rose 0.8%, and Hong Kong’s Hang Seng was nearly unchanged.

Stocks in Shanghai slipped 1.6% after President Trump signed a bill and executive order that he says will hold China accountable for its oppressive actions against the people of Hong Kong.

The legislation and order are part of an escalating diplomatic offensive against China that is adding to chronic tensions over trade and other issues.

Benchmark U.S. crude oil rose 91 cents to settle at $41.20 per barrel. Brent oil, the international standard, picked up 89 cents to settle at $43.79 per barrel.