Stocks extend their rally with S&P 500 and Nasdaq hitting fifth straight day of gains

U.S. stocks climbed Wednesday, helped by banks and reopening stocks as the 10-year Treasury yield edged higher.

The Dow Jones Industrial Average rose 39.24 points, or 0.1%, to 35,405.50. The S&P 500 added 0.2% to a new closing high of 4,496.19. The Nasdaq Composite gained 0.1% to 15,041.86, also a new closing high.

The yield on the benchmark 10-year Treasury note rose as high as 1.352% Wednesday, hitting its highest level since earlier in the month when it yielded as much as 1.364%. That lifted shares of JPMorgan 2%, while Wells Fargo climbed 1.9%. Regional banks Zions gained 1.6%, and Regions Financial rose 1.5%. Fifth Third added 2.2%.

Travel and leisure stocks were higher, too. Several air carriers and cruise lines held a 1% gain for most of the session. Casino stocks Penn National Gaming and Caesars Entertainment gained 8.6% and 4%, respectively. MGM Resorts added 2.9%.

Chip makers were higher, with Western Digital jumping 7.8% after a Wall Street Journal report said the company is in advanced talks to merge with Japan's Kioxia Holdings. Nvidia shares rose 1.9% following news that the Department of Energy will run its new supercomputer on the company's computing platform. Micron Technology also rose 2.8%.

Markets have been boosted by signs that delta variant cases could be peaking. Fundstrat's Tom Lee said in a note to clients late Tuesday that the worst may be behind us, citing a falling positivity rate in Florida and Texas.

"We realize equity markets have been choppy and the wide variance of perspective means investors do not have an easy consensus. But our central case remains that we are shifting further into full risk-on, with an 'everything rallies' into" year-end, wrote Lee. "The cadence of incoming data has improved in the past few days, the most notable being the apexing of COVID-19 cases in a number of states."

Johnson & Johnson said on Wednesday that its Covid Vaccine booster shot showed promising results in early stage clinical trials, significantly increasing virus-fighting antibodies. The stock dipped slightly nevertheless.

Delta Air Lines said Wednesday it would raise health insurance premiums for unvaccinated employees to cover higher Covid costs. The company has about 75,000 employees and roughly 75% of them are fully vaccinated. On Tuesday, Goldman Sachs it will require employees entering its offices to be fully vaccinated. Delta and Goldman added 1.9% and 1.1%, respectively.

Wells Fargo Securities head of equity strategy Christopher Harvey also sees more gains on the horizon. He lifted his year-end S&P 500 target to 4,825 on Tuesday, which is about 7.5% above where the index finished that day. Harvey's call is based on its strength through August carrying over into the final months of the year.

"Over the last 31 years, there have been nine instances where the S&P 500 had a price return of 10%+ in the first eight months of the year; over the next four months, the index averaged another +8.4%. None of these instances produced a negative return during those last four months," he wrote in a note to clients.

Dick's Sporting Goods shares soared 13.3% and hit an all-time high Wednesday after reporting strong quarterly earnings.

The highly anticipated Jackson Hole symposium kicks off Thursday, and central bankers may provide updates on their plan around tapering monetary stimulus. The Federal Reserve has been purchasing at least $120 billion of bonds per month to curb longer-term interest rates and jumpstart economic growth as the pandemic wreaked havoc on the economy.

Chairman Jerome Powell is slated to make remarks on Friday.

"Taper talk is the worry, but if inflation continues to run hot and economic data continues to be mixed the timing of tapering could get pushed," noted Lindsey Bell, chief investment strategist at Ally Invest. "It's unlikely that the Fed will force a taper on an economy that isn't ready, and the outlook is becoming less certain with the rise of the delta variant."

Bell added that the deciding factor could be August's jobs report due Sept. 3, given that Covid cases have jumped in the past month as the delta variant spreads.

Several tech companies will report earnings on Wednesday after the market closes, including Dow component Salesforce. Box and Snowflake are also on deck.

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