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Dow Ends Higher and Stocks Rebound as Investors Buy the Dips

Wall Street recovers Tuesday as investors turn their attention to a slew of earnings reports.

Stocks rebounded Tuesday as investors bought the dips from Monday's steep selloff.

The Dow Jones Industrial Average rose 550 points, or 1.62%, to near 34,512, the S&P 500 gained 1.52% and the Nasdaq rose 1.57%.

At one point on Tuesday the was up almost 660 points, or 1.9%.

Leading the Dow higher were Boeing  (BA) - Get Report, up 4.9%, and Honeywell  (HON) - Get Report, up 4.1%.

Stocks of cyclical companies, such as those in the financial, industrial and energy sectors, led Tuesday's bounce-back.

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Stocks had plummeted Monday as Wall Street weighed how rising COVID-19 cases might affect the economic recovery in the U.S. and globally. The Dow dropped more than 700 points, its worst decline since October.

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The yield on the benchmark 10-year Treasury on Tuesday edged higher to 1.21%. Traders have been paring bets on any near-term moves on interest rates or support from the Federal Reserve amid increasing concern that delta-variant infections will slow the global economic recovery.

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"Valuations across the market as a whole had become stretched and we were due for a pullback, but many of the cyclical companies are selling off on fears that COVID will stop the recovery in its tracks," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

"We don’t believe that that’s the case and are willing to let the selloff run its course and buy the dip on the belief that the economy will fully recover and return to its prior growth trajectory, bringing most of the cyclical companies in the airline, travel and leisure industries along with it," Zaccarelli added. 

Benchmark U.S. crude rose 1.5% to $69.65 a barrel Tuesday after tumbling on worries a resurgence of COVID-19 would sap energy demand.

International Business Machines  (IBM) - Get Report finished 1.5% higher after reporting second-quarter revenue gains that were the strongest in three years.

About 80 companies are expected to post quarterly earnings over the next week, including Netflix  (NFLX) - Get Report and United Airlines  (UAL) - Get Report after the close of trading Tuesday.

So far, 90.2% of the 41 S&P 500 companies reporting have topped Wall Street forecasts, with analysts expecting collective earnings to rise 72% from a year earlier to a share-weighted $393 billion.

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Bitcoin tumbled below $30,000 for the first time in about a month as the equities selloff, spurred by concern over the delta variant of COVID-19, sparked a rush to old-school paper bonds and gold.

Boeing and Honeywell are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells the stocks? Learn more now.