Dow rebounds 300 points after five straight losing days

The Dow Jones Industrial Average gained Monday as the index rebounded from a losing streak.

The Dow jumped about 310 points, or 0.9%. The S&P 500 rose 0.3%. The Nasdaq Composite traded near the flatline.

The blue chip average’s bounce comes after the Dow and the S&P posted a fifth straight day of losses Friday, while the Nasdaq Composite registered its third consecutive negative session. For the S&P 500, Friday marked its worst losing streak since February 22.

“With supply chain disruptions, COVID-19 variant risk, stickier than expected inflation along with other uncertainties that challenge the present recovery’s path toward a sustainable economic expansion, the age old adage ‘progress not perfection’ among current developments appears best suited for investors to focus on for now,” Oppenheimer’s John Stoltzfus said in a note Monday.

Covid cases reached a 7-day average through Friday of about 136,000, down from 157,000 average new cases at the end of August, according to the CDC. Pfizer’s Covid vaccine could be authorized for children by the end of next month, sources familiar told Reuters.

“Vaccinations plus immunity should mean cases eventually fall. Full reopening and related spending has been pushed out,” wrote UBS strategist Keith Parker, who sees the S&P 500 gaining another 4% through year-end.

Energy names popped Monday as oil prices rose. Marathon Oil, APA Corp, Occidental Petroleum and other energy stocks were among the top gainers on the S&P 500.

Names linked to the reopening also gained. Delta Air Lines, United Airlines and Carnival Corp edged higher. Traditional cyclical plays GM and Citigroup rose.

Apple moved higher ahead of a launch event Tuesday where the company is expected to introduce new iPhones.

Nike shares fell after BTIG downgraded the stock citing supply chain challenges caused by the pandemic. Production issues could significantly impact Nike’s holiday sales, BTIG said.

“Supply bottlenecks, inventory shortages, higher commodity prices, and higher shipping rates have all contributed to higher input costs,” noted Charlie Ripley, senior investment strategist for Allianz Investment Management.

Inflation fears have contributed to the market’s recent losses. Data released Friday showed that producer prices rose 0.7% in August and 8.3% year over year, which was the biggest annual increase since records were first kept in November 2010.

“[Friday’s] data on wholesale prices should be eye-opening for the Fed, as inflation pressures still don’t appear to be easing and will likely continue to be felt by the consumer in the coming months,” Ripley said.

The closely watched consumer price index will be released on Tuesday, at which point the Street will see how much of the heightened costs are being passed along to consumers. Economists surveyed by FactSet are expecting the reading to show that consumer prices jumped 5.3% on an annual pace in August. Retail sales data will be released later in the week.

Stocks have been under pressure since August’s jobs report, released by the Labor Department on September 3, missed expectations. Worries are rippling through the market that the pandemic will continue to hamper economic growth while hot inflation will prompt the Federal Reserve to take action.

“The negative impact of the delta variant on the cyclical trade is clear,” noted strategists at Jefferies. “It is increasingly evident that the impact of delta has delayed any Federal Reserve attempt at tapering, just as it has given fresh momentum to the Big Tech stocks with growth outperforming value so far this quarter.”

The Fed will begin its two-day policy meeting on September 21, where investors will be looking for clues about the central bank’s bond-buying program.

Despite last week’s losses, the major averages are still relatively close to their record levels. The Dow, S&P 500 and Nasdaq Composite are all about 2% or less below their all-time highs.

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