The stock market closed above a key milestone and looks set to keep moving higher for now.
The S&P 500 broke above its 200-day moving average for a second day, but this time succeeded in closing above it. The S&P 500 surged 44 points to 3,036 on Wednesday, after trading weaker early in the day. Before this week, the S&P was last above the 200-day on March 5.
The 200-day happened to be at 3,000, a level that is also seen as psychologically important.
The market was helped Wednesday by a steadying in momentum names, like Netflix and Tesla that touched their lows of the day just before 11 a.m. ET. The S&P 500 hit its low at about the same time, as the group which includes the FAANG names, Facebook, Apple, Amazon, Netflix and Google parent Alphabet, all started to turn higher.
Those big tech names that have been drivers of the market took a rest this week, as traders focused on names that will benefit from a reopening economy, like airlines, banks and industrials. The S&P financial sector is up more than 9.6% this week so far, and industrials are up more than 7.%. Communications services, which includes internet names, was up just 0.8%.
"Another feather in the hat of the market for reclaiming the 200-day. We'll see where it takes us," said Scott Redler, partner with T3Live.com. "Tech had one more washout recovery to relieve some pressure and got back in line. I wouldn't be surprised if tech acts better and the reopening trade takes a rest, like banks and the airlines."
The 200-day is simply the average of the closing prices for the last 200 days for an index or even individual stock. In the case of the S&P 500, some investors view the 200-day as a line in the sand, where they will go long above that level but not below it. That can generate interest in the market and help pull it higher.
Redler said the S&P 500 could face new resistance when the index reaches 3,080, a zone where the market broke down in March.
Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said the broadening out of the rally has been important and should help propel stocks. "The market has to figure out there's more than one story to price," he said, noting it would be hard to have a sustained rally without FAANG.
"In order to have a sustained rally, you needed broader participation. We still worry their fundamentals are not consistent with ... gains we are seeing, especially in a lot of those smaller regional banks," he said. Christopher said it's unclear what kind of loan losses they could face in real estate, and from businesses like restaurants.
"The rotation we're seeing is a rotation to value, to small caps. It's as if everything that got beaten up was getting a bid," he said.
Christopher said there are headwinds for the market, including the rising tensions between the U.S. and China. That could come into focus later in the year, as the presidential election gets closer and candidates discuss China relations. For now, however, the V-shaped recovery is being seen as possible by some investors who see progress in the reopenings, he said.
"I don't think this has registered yet," Christopher said. "The market is still paying all of its attention to the accumulation of recent hopeful signs, not to cold hard facts, about a vaccine, a successful opening and a V-shaped recovery, which had been dismissed before."