Stocks bounce back for a second day, Dow jumping more than 200 points to make up Monday’s losses

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US stocks rose higher on Wednesday as stocks continued their recovery from a one-day loss earlier in the week.

Better-than-expected earnings reports from Dow members Coca-Cola and Johnson & Johnson added to the bullish mood.

The Dow Jones Industrial Average rose 286.01 points, or 0.83%, to 34,798.00. It sits less than 1% from a record. The S&P 500 was up 0.82% to 4,358.69. The Nasdaq Composite climbed 0.92% to 14,631.95.

The 30-share index rose nearly 550 points on Tuesday after falling 725 points on Monday for its worst session in eight months. The successive rallies have now completely wiped out the losses from the beginning of the week for all three indices.

“Tuesday was an oversold course in the textbook after the collapse on Monday,” Thomas Essaye of Sevens Report Research said in a report on Wednesday. “However, aside from short-term swings, we need to see returns hit rock bottom and economic growth beat estimates (two things we think will happen) for value and cyclicals to regain leadership.”

The bond market, particularly the 10-year government bond yield, is driving the equity markets. On Wednesday, the 10-year yield rose 8 basis points to 1.29% (1 basis point equals 0.01%). The yield fell to a new 5-month low on Monday before stabilizing on Tuesday. The collapse in interest rates unsettled equity investors by signaling a possible slowdown in the economy due to the spread of Covid variants or a possible error by the Federal Reserve.

Even if bonds move higher, the trend is still bearish compared to five months ago when the 10-year price was above 1.7%.

“The catalyst for why investors have become familiar with risk assets in the past two days is admittedly difficult to pin down,” said Chris Hussey of Goldman Sachs on Wednesday. “Perhaps investors have just embraced the notion that the response function to a new wave of the virus is unlikely to be the same as the response function deployed in spring 2020.”

Stocks, which would benefit most from a sustained rapid economic reopening, rose on Wednesday after recovering from Monday’s sell-off in the previous session. Carnival’s shares were up 9.4%. Las Vegas Sands was up 3.4%.

Energy stocks led the ongoing rally as oil continued to rebound after falling below $ 70 a barrel on Monday. The Energy Select SPDR rose 3.4%.

Dow member Coca-Cola gave market sentiment an early boost after it reported quarterly sales surpassing pre-pandemic 2019 levels and raised its guidance for the full year. Coca-Cola shares gained more than 1%.

Dow member Johnson & Johnson’s stock traded almost unchanged even after the drug maker reported better-than-expected earnings and revenue for the second quarter and also raised its guidance for 2021.

Moderna got into the S&P 500, which gave the stock a 30% gain from a week ago. The stocks gained nearly 4.5%.

Verizon’s stocks rose slightly after reporting better-than-expected revenue and subscriber growth and raising their outlook for the full year.

Chipotle’s shares rose 11.5% as the Mexican fast food chain reported quarterly sales ahead of pre-pandemic levels as diners returned to their restaurants for dinner.

Netflix reported disappointing subscriber forecasts for the third quarter after the bell on Tuesday. The streaming giant expects 3.5 million net subscribers in the third quarter, nearly 2 million below analyst estimates. The company also reported results that fell short of expectations.

Netflix shares recently lost 3.2%.

According to FactSet, about 85% of the S&P 500 companies that have reported to date have beat estimates.

On Tuesday, reopening stocks rallied sharply from Monday’s sell-off sparked by a Covid-inspired global growth fear. American Airlines was up 4% and Norwegian Cruise Line was up 10%.

Some strategists see the market heading for a volatile phase in which there could be a deeper pullback. Investors juggle inflation concerns as well as new Covid cases that are recovering in the US when the delta variant spreads.

“I think what we’ve seen here are the early warning shots of a correction that we’re likely to see … in late August, September, October,” said Matt Maley, equity strategist at Miller Tabak.

However, data shows that spikes in the number of Covid cases don’t typically keep the stock market down for long. In the 14 months since the April average daily cases peak last year, case numbers in the US have risen four times while the S&P 500 remained positive.

Goldman’s Hussey said knowing better about Covid and the vaccines available to mitigate its effects could help build market confidence that U.S. economic activity is unlikely to freeze again with another wave of virus cases.

Rich Steinberg, chief marketing strategist at The Colony Group, told CNBC that he expects “whiplash behavior from investors to continue.”

“We will see a follow-up rally as investors have been conditioned to buy the dip,” he said. “You’ve also been negatively conditioned to worry about the economy and the virus out of last year’s stressful world. I would describe the environment as fearful, but we’re not seeing high levels of short-termism.”

– with reports from CNBC’s Patti Domm and Michael Bloom