By Mischa Frankl-Duval and Amber Burton
The Dow Jones Industrial Average continued climbing Tuesday, powered by cyclical stocks like manufacturers and energy companies that are particularly sensitive to the economy's trajectory.
The blue-chip index outpaced the broader S&P 500 and Nasdaq Composite Index for a second consecutive day as investors reordered the market's winners and losers.
The Dow has outperformed the technology-heavy Nasdaq by 6.74 percentage points this week, the largest two-day performance spread since March 2001. It rose 262.95 points, or 0.9%, to 29420.92 on Tuesday, its third-highest close in history. Boeing, Chevron and 3M were among the biggest gainers.
The Nasdaq Composite, meanwhile, fell 159.53 points, or 1.4%, to 11553.86, with the big technology stocks that have powered much of this year's stock rally pulling back for a second consecutive session.
The S&P 500 edged down 4.97 points, or 0.1%, to 3545.53.
Both the Dow and S&P 500 set intraday records Monday after a coronavirus vaccine developed by Pfizer and partner BioNTech showed in an early analysis to be more than 90% effective in protecting people from Covid-19. That spurred investors to buy shares of airlines, retailers, regional banks and other stocks that have been battered during the pandemic as they bet on a faster-than-expected reopening.
Still, some investors cautioned that this week's rally was likely overdone because the pandemic is far from over and questions remain about how quickly any vaccines may become available.
The U.S. reported more than 100,000 coronavirus cases for the seventh straight day and hospitals face an uptick in patients. That is triggering worries that local authorities from New York to California may reinstitute some lockdown measures to curb the outbreak.
"The pandemic still has a ways to go, unfortunately," said Nick Brooks, head of economic and investment research at Intermediate Capital Group. "The Pfizer development is a great development, but I don't think it's the game-changer that markets seem to perceive."
There are still many questions about how quickly vaccines can be rolled out once they are approved by regulators, and how long the immunity would last, he added.
"It's far too early for investors to be making a structural shift from growth to value," Mr. Brooks said. "There's been pretty substantial damage to economies and that's going to take some time to repair."
He cautioned that markets are likely to remain volatile.
Investors also continue to assess prospects for additional stimulus from the government to help bolster the economic recovery.
The positive news about coronavirus vaccines, combined with improvements in the U.S. economic situation, might reduce support among lawmakers for a large fiscal package, said Esty Dwek, head of global market strategy at Natixis Investment Managers.
"These more promising vaccine developments are an argument for Republicans to delay or to have a smaller-scale stimulus," Ms. Dwek said. "We will definitely get something, even if it's smaller deals like airlines and more targeted measures."
Republican Senate Majority Leader Mitch McConnell has sounded a little less confrontational than some people had expected on stimulus in the days following the Nov. 3 election, said James Athey, an investment manager at Aberdeen Standard Investments.
"If it sounds like a fiscal package before Christmas -- and one of more than $500 billion -- is doable, is something they are aiming for, I think that would be a boost for risk sentiment," Mr. Athey said.
The market has in recent months largely tended to focus on positive developments, he said. "It wouldn't surprise me if, after some consolidation, we are able to push toward new highs in the equity market, but I think there's a bit more wood to chop in the short term," he said.
Following its sharp rise on Monday, Pfizer shares fell 52 cents, or 1.3%, to $38.68. Airline stocks continued climbing, while shares of technology firms declined again.
Delta Air Lines rose 27 cents, or 0.7%, to $37.04. Southwest Airlines jumped 92 cents, or 2.1%, to $44.81.
Alphabet fell $23.70, or 1.4%, to $1737.72. Zoom Video Communications dropped $58.00, or 15%, to $324.00.
Shares of drugmaker Eli Lilly rose $4.23, or 3%, to $146.56 after U.S. health officials authorized the use of an antibody drug in early-stage Covid-19 patients.
"The one thing I would say is it's really difficult to find something that you can get really super excited about, because of the prices of the market," said Tim Courtney, chief investment officer at Exencial Wealth Advisors.
He added he isn't seeing many well-respected investors "go back up a truck and just load up on assets. They're being very picky on what they buy right now. And I think it's because the pricing. It doesn't look like a super fire sale price."
In bond markets, yields on the 10-year Treasury note ticked up to 0.970%, from 0.957% Monday. Government bonds sold off sharply in the first trading session of the week, pushing yields to their highest levels since mid-March.
Brent crude, the international benchmark for oil, rose 2.9% to $43.61 a barrel. Gold prices climbed 1.2% to $1875.40, a day after suffering their worst decline since June 2013.
Overseas, the Stoxx Europe 600 edged up 0.9%. In Japan, the Nikkei 225 Index closed 0.3% higher. Hong Kong's Hang Seng Index rose 1.1%, while China's Shanghai Composite Index dropped 0.4%.
"Investors have been waiting for the moment to tap into cheaper markets but they just didn't have confidence," said Tai Hui, chief Asia market strategist for J.P. Morgan Asset Management in Hong Kong. "The breakthrough in vaccine development could trigger the rotation out of the outperformers to the underperformers."
--Xie Yu contributed to this article.
Write to Mischa Frankl-Duval at Mischa.Frankl-Duval@wsj.com
(END) Dow Jones Newswires
11-10-20 1742ET
