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Stocks rebound a day after a rout prompted by fears over the Delta variant.


Stocks snapped back on Tuesday, rebounding from Wall Street’s worst day in months in a dramatic swing highlighting a divide among investors over the threat of the Delta variant to global growth.

The quickening spread of the coronavirus and the uncertain path of monetary policy have been a reminder that the economic recovery from the pandemic remains rocky, and introduced a bout of volatility into financial markets this week. The S&P 500’s 1.5 percent jump on Tuesday was its biggest daily gain since March. The index’s 1.6 percent drop on Monday was its sharpest decline since mid-May.

“Markets are clearly reassessing the risks posed by the new variant,” said Hugh Gimber, a strategist at JPMorgan Asset Management in London. “Nothing has changed in the data, the current vaccines still appear to be very effective at preventing severe illness, but the optimism around how smoothly and how quickly the global economy can reopen has faded this week.”

Trading in government bonds was volatile, with the yield on 10-year U.S. Treasury notes falling sharply before recovering to about 1.23 percent. On Monday, the yield had tumbled 10 basis points to 1.19 percent, its lowest point since February.

Stocks are taking their cue from the bond market at the moment, Mr. Gimber said. “Ultimately, a 10-year Treasury yield at 1.2 percent or even lower is not consistent with strength of the global economy today,” he said.

The Stoxx Europe 600, which tumbled 2.3 percent on Monday — its worst day this year — rose 0.5 percent on Tuesday. Oil prices, which had also fallen sharply on Monday, were higher as well.

Tuesday’s rally left some sectors on Wall Street higher than they were before Monday’s sell-off. United Airlines, for example, gained 6.6 percent ahead of its second-quarter financial report on Tuesday. It had fallen 5.4 percent on Monday.

After trading ended, United said it lost $434 million during the three months that ended in June but fared better than anticipated during that quarter and expects to return to profitability in the current quarter.

American Airlines rose 8.4 percent and Norwegian Cruise Lines climbed 8.3 percent after tumbling more than 5 percent the day before, even though rising infections from the Delta variant have prompted many governments to maintain or reintroduce travel restrictions, testing requirements and mask mandates. New cases of coronavirus also continue to overshadow the festivities of the Tokyo Olympics.

Banks also bounced back from a rocky session on Monday. JP Morgan was up 1.7 percent on Tuesday, while Morgan Stanley rose more than 3 percent.

The swings this week show that investors haven’t settled yet on how the resurgence in cases will impact bets on the economy’s reopening. There’s a strong argument to be made for growth to continue despite the rising number of cases, said Priya Misra, the head of strategy for global interest rate markets at TD Securities.

“The high levels of vaccinations in the U.S. will keep hospitalizations low,” Ms. Misra said. “Even if the Delta infections rise and it doesn’t impact mortality as much, the reopening trade can continue.”

Traders in particular will be paying close attention to Britain’s reopening as a test case that could “challenge the thesis that a widely vaccinated population can reopen without restrictions.” said Mr. Gimber of JPMorgan Asset Management.

On Monday, the British government lifted most of its coronavirus restrictions in England but still urged caution as the country reported nearly 40,000 new cases. The same day in the U.S., the State Department and Centers for Disease Control and Prevention told Americans to avoid traveling there. On Tuesday, the British pound fell 0.3 percent against the U.S. dollar, to its lowest level since January.

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