This Time May Be Different as U.S. Stocks Eye Back-to-Back Gains

The best day for at least one U.S. stock gauge since the Great Depression has strategists mulling the chance of further gains.

American shares haven’t enjoyed a two-day rally since Feb. 12, and the last three surges of more than 5% in the S&P 500 Index were immediately followed by equivalent losses. But with a record surge of stocks trading on an uptick at Tuesday’s open and activity heavily skewed toward winners, Sundial Capital Research Inc. is hopeful this time could be different.

“The buying interest and close at the highs on Tuesday could be enough to finally change sentiment enough to string together some up days,” said founder Jason Goepfert in a note Tuesday. “And if buyers can do that, historical precedents argue strongly that the worst of the selling is behind us, at least for a couple of months.”

The S&P 500 jumped 9.4% on Tuesday, the most since October 2008, as Congress closed in on an unprecedented spending bill to prop up the virus-stricken U.S. economy. The Dow Jones Industrial Average surged 11.4% — its best gain since March 1933.

In and of itself, just two days of back-to-back gains would be a “great signal” for stocks, said Mischler Financial’s Director of International Trading, Larry Peruzzi, in recent emailed comments.

Still, there were signs investor caution remained high. While April futures on the Cboe Volatility Index fell Tuesday, a gauge of volatility on the VIX pushed higher, and investors were busy buying exposure to further price swings in index and exchange-traded-fund products, noted Susquehanna International Group LLP strategist Chris Murphy.

Meanwhile, futures on the S&P 500 edged lower in early Asia trading Wednesday.

“It is important to remember that some of the largest one-day rallies in SPX’s history took place during bear markets,” Murphy said. “One-day pops are not uncommon in a down market.”

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