Covid case flare-ups typically haven't kept the stock market down for long

Published Wed, Jul 21 20219:57 AM EDTUpdated Wed, Jul 21 202111:30 AM EDT

The stock market rebounded from a sharp sell-off the day prior, shaking off fears of rising Covid cases in what has become a familiar pandemic trend. Since the virus sent stocks tumbling at the start of the pandemic in early 2020, surges in U.S. infection levels have not led to prolonged downturns in the S & P 500 , market data shows. The S & P 500 fell 15.6% between the date of the first reported U.S. case in January 2020 through the April peak in average daily cases amid widespread economic shutdowns. Nationwide case counts have risen substantially four times in the 14 months since, and the index has been positive over each of those periods. The S & P 500 climbed 1.52% on Tuesday to gain back nearly all of Monday's losses. "I think growth is going to sustain, I don't think Covid is going to kill us off again," Leuthold Group chief investment strategist Jim Paulsen said on CNBC's " Squawk Box " on Tuesday. "We've already vetted this crisis once, and once that happens I think it loses its ability to do that." The weeks or months of rising cases have not been exclusively smooth sailing for stocks. The S & P 500 fell nearly 6% in one day amid a worsening outbreak in June 2020, for example, and saw 10 days of 1% declines or more while case counts were climbing to pandemic highs over the winter. Monday was the index's worst day since May. In each scenario, however, the virus news has not been a loud enough alarm bell to stop the market rally. Covid case counts, of course, have not been the only metric watched by investors throughout an eventful 2020 and 2021 in which a presidential election, vaccine development news, inflation and earnings have all influenced the market. Paulsen suggested that the bond market may be more closely tied to the path of the virus, saying that "when yields have gone down, it's starting to connote that maybe Covid is a problem again." Indeed, the 10-year Treasury yield has fallen during four of the five periods of rising case counts, including a slide from 1.48% to 1.22% since the latest low point in average daily cases a month ago. ICapital Network strategist Anastasia Amoroso said Tuesday that while she's watching the bond market, hedge fund positioning, and earnings as market indicators, the delta variant is something that "we shouldn't disregard." "If there's one humbling thing that Covid has taught us, it's that as quickly as we want it to pass, it's just not passing," she said on "Squawk Box." "It's definitely lingering so we shouldn't brush that aside."