Turnaround Tuesday on Wall Street: Stocks attempt rebound

Once again the steep losses of more than 1% for each of the major indexes are being quickly followed by green arrows across the board.

The Dow (INDU) rose 325 points, or 0.9% around mid-morning, while the S&P 500 (SPX) climbed 0.5%, having pared some gains. Similarly, the Nasdaq Composite (COMP) was also up 0.5%.

All three benchmarks are on track for decent gains this year. Both the Dow and the S&P will outpace last year’s performances.

The losses came on the heels of soaring Covid cases as the Omicron variant is slamming Europe and the United States, where governments have responded by tightening restrictions.

On Tuesday, the US Centers for Disease Control and Prevention suggested that Omicron cases will likely cause higher infection rates than we’ve seen with previous peaks.

Although this may bring back memories of the Delta case surge of the summer, some analysts are betting that the Omicron spread might be less severe.

“This strain of COVID appears to be much weaker in severity than the Delta strain, even if it is more transmissible,” said analysts at Bespoke Investments. And that would mean less economic disruption.

On top of that, there’s drama in Washington after Democrat Sen. Joe Manchin said he would oppose President Joe Biden’s $1.75 trillion “Build Back Better” bill.

Thinner trading volume in the final weeks of the year can also mean that market moves are exacerbated. So more volatility could lie ahead.

That said, the CBOE volatility index (VIX), or VIX for short, fell more than 2% Tuesday.

“Investors may be getting into a speculative mood,” said JJ Kinahan, chief market strategist at TD Ameritrade.

“Additionally, cryptocurrencies which have recently been correlated with ‘risk on’ investments are seeing rallies as well.”

Bitcoin was up 5% around mid-morning, according to CoinDesk data.

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