The stock market’s October surprise could be positive

Wall Street turned around on Friday, climbing higher in the hope that an end to the COVID-19 pandemic could be in sight anytime soon. After a terrible September that Dow Jones industry average (DJINDIZES: ^ DJI), S&P 500 (SNPINDEX: ^ GSPC), and Nasdaq composite (NASDAQINDEX: ^ IXIC) all of them recovered and made solid profits.


Daily percentage change

Daily change of points




S&P 500

+ 1.15%



+ 0.82%


Data source: Yahoo! Finances.

The travel and tourism sector has posed a particular challenge for investors over the past year and a half. The pandemic caused travel to a near-halt, and many weaker actors have struggled to survive since then.

However, many companies in the industry are now seeing that the pent-up demand among travelers is finally leading to an improvement in fundamentals. Positive news on the COVID-19 front helped propel travel stocks higher on Friday, and this could be the start of a longer-term trend for the ailing sector.

Big wins while traveling

Pick any area of ​​the travel industry and chances are you can make a profit there. Cruise ship stocks have been desperate for a return to normal operating conditions and investors today are optimistic about their future. Norwegian Cruise Line holdings (NYSE: NCLH) led with an increase of 6% carnival (NYSE: CCL) and royal caribbean (NYSE: RCL) 4% increase.

Hotel shares also recorded gains. Hilton (NYSE: HLT) was up nearly 5% while Hyatt (NYSE: H) saw an even steeper increase of 6%. This also resulted in huge profits for the hotel-focused online travel sites with Postings (NASDAQ: BKNG), Expedia group (NASDAQ: EXPE), and Airbnb (NASDAQ: ABNB) everyone wins 3% to 4% a day.

Once empty airports like this one are filling up again. Image source: Getty Images.

Airlines made even bigger profits. Southwest Airlines (NYSE: LUV) received an upgrade which helped the stock rise 6%. United Airlines holdings (NASDAQ: UAL) and Delta Airlines (NYSE: DAL) performed even better with increases of 8% and 7% respectively. A well-known industry analyst upgraded Southwest stock from neutral to overweight and raised its price target for the airline by $ 6 to $ 70 per share.

Industry data suggests travel spending has already risen significantly, and the planned easing of border restrictions could invite a flood of foreign tourists to the US to further increase travel prospects.

It is too early?

Some naysayers warn that trusting travel stocks may be out of place. Many companies don’t even have employees in the office, let alone ready to fly to distant countries to do business. Advances in distance communication technology won’t completely eliminate travel, but they could reduce the extent to which it recovers after the negative effects of the pandemic wear off.

However, if summer travel has recovered, it could lead to big jumps during the reporting season. That could give the industry even more positive impulses.

In the end, travel activity is likely to return to pre-pandemic levels, whether it happens immediately or after an extended period of time. To the extent that travel stocks are still poised for the risk of ultimate failure, they could represent good value even after their price gains. However, for those who even jumped their share prices before the pandemic, one has to wonder if the rally itself is outdated.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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