By Yasin Ebrahim
Investing.com - The Dow staged a strong rebound from lows on Monday, as investors weighed further efforts by the Federal Reserve to support credit markets against a jump in Covid-19 infections across U.S. and other parts of the world that threatens to disrupt the pace of the economic reopening.
The Dow Jones Industrial Average was up 0.62%, or 157 points, after falling more than 300 points at the open. the S&P 500 gained 0.83%, while the Nasdaq Composite added 1.43%.
Just a month after the Federal Reserve began buying exchange-traded funds (ETFs) invested in corporate bonds, the central bank announced on Monday that it would buy, on the secondary market, individual corporate bonds with remaining maturities of five years or less.
On May 12, the Fed began buying corporate bond ETFs under its the Secondary Market Corporate Credit Facility (SMCCF), to steady corporate debt markets following record outflows on concerns about companies defaulting on their debt.
The announcement came as investors assessed an uptick in Covid-19 infections that threatened to slow the process of reopening the economy.
Reports of a jump in coronavirus cases across the U.S., China, and parts of Europe raised fears a second wave of the virus could be on the horizon that could potentially lead to fresh lockdowns.
Leaders in New York and Texas threatened to renew lockdowns.
New York Gov. Andrew Cuomo said on Sunday that he would reimpose shutdowns if businesses failed to comply with current restrictions and people didn’t socially distance, according to Bloomberg.
Still, some on Wall Street continue to downplay the prospect of lasting damage on corporate earnings.
"But, the combination of incremental data improvement and extraordinary policy support has been sufficient to assure the forward-looking market that the earnings damage resulting from the virus will ultimately be short-lived," Goldman Sachs (NYSE:GS) said in a note.
Travel and tourism, sectors sensitive to the pace of reopenings, pared some of their losses and helped the broader market bounce from session lows.
American Airlines (NASDAQ:AAL) ended flat, Southwest Airlines (NYSE:LUV) was up 1%, while United Airlines (NASDAQ:UAL) slipped 2.3% after the airline detailed plans to sell up to 28 million shares.
Shopify (NYSE:SHOP) rose 8.3% after the e-commerce platform announced a new partnership with Walmart (NYSE:WMT) that will open the latter's Marketplace to Shopify’s small business sellers.
Tesla (NASDAQ:TSLA) jumped 6% following reports that the electric carmaker is exploring the viability of installing a new assembly plant near Austin, Tx.
Elsewhere, Moderna (NASDAQ:MRNA) jumped 7.4% after on reports Israel was buying the company's coronavirus vaccine.
Energy, meanwhile, also retracted losses as oil prices turned positive, shrugging off concerns about weakness in crude demand.