Investors turn to stocks as shrug off COVID worries

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NEW YORK — Investors moved money into riskier assets on Wednesday, with stocks rising due partly to positive corporate earnings, and yields climbing, despite fears about the Delta variant and inflation, which spurred an earlier flight to safety.

Wall Street extended gains after ending Tuesday sharply higher when it snapped a several-day losing streak. Yields on U.S. treasuries rose as markets regained a sense of calm.

Positive earnings from major companies, including Verizon Communications Inc, Coca-Cola Co and Chipotle Mexican Grill, helped fuel the optimism.

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“The scare on Monday had a lot to do with the Delta variant, but that fear has subsided. It looks like the market has shrugged that off in a big way, and here we are bouncing back to new highs,” said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas, Texas. “I think the big issue out there that we see from investors is where else can I go to make money except the stock market.

“With a very accommodating Fed, saying they’re not going to raise rates out until 2022 or longer, the market should continue to do well,” Bradshaw said.

At midday, the Dow Jones Industrial Average rose 261.51 points, or 0.76%, to 34,773.5, the S&P 500 gained 27.62 points, or 0.64%, to 4,350.68 and the Nasdaq Composite added 84.35 points, or 0.58%, to 14,583.23.

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The yield on benchmark U.S. Treasuries rebounded for a second day on Wednesday, with 10-year Treasury notes up 7.9 basis points to 1.288%.

Stocks could receive a further uplift later Wednesday if U.S. President Joe Biden’s $1.2 trillion bipartisan infrastructure bill can navigate a planned procedural vote despite Republican appeals for delay.

In Europe, a European Central Bank meeting on Thursday is expected to strike a dovish tone and provide a further boost. The benchmark STOXX index of the region’s 600 largest shares rose 0.2%.

The safe-haven dollar on Wednesday pulled back from more than three-month highs, with risk appetite back up with stocks higher, but inflation fears and concerns about the highly contagious coronavirus variant kept investors cautious.

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Another safe haven, the Japanese yen, was also down on the day against the dollar, as risk aversion eased.

As well as looking past rising COVID-19 cases, investors seemed to set aside concerns that data last week showing a surge in U.S. consumer prices in June could prompt the Federal Reserve to bring a quicker end to emergency stimulus measures.

That earlier flight to safe havens had pushed U.S. 10-year yield down more than 20 basis points in the space of a week.

Gold likewise lost some of its recent safe haven appeal on Wednesday, with spot gold dropping 0.3% to $1,804.06 an ounce.

RISING INFECTIONS

MSCI’s gauge of stocks across the globe gained 0.84%.

“While some of the world is shrugging off rising infections as vaccination rates limit the severity of any symptoms of new cases, there are few parts of the world that can totally ignore this,” said Rob Carnell, Asia-Pacific chief economist at ING.

Oil prices rose as improved risk appetite provided support despite data showing an unexpected rise in U.S. crude inventories last week and a weaker demand outlook due to rising COVID-19 infections.

U.S. crude recently rose 4.79% to $70.42 per barrel and Brent was at $72.33, up 4.3% on the day.

(Reporting by Jessica DiNapoli in New York; additional reporting by Lawrence White, Andrew Galbraith, Dhara Ranasinghe; Editing by Christopher Cushing, Kim Coghill, Catherine Evans, Timothy Heritage, Tomasz Janowski and Barbara Lewis)

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