• The Dow Jones Industrial Average (DJIA) rallied on Wednesday after recovering from a dismal futures session.
• Coronavirus data continues to make headlines, with U.S. cases surpassing 3 million.
• Wall Street is looking at a different data-set: the mortality rate, which remains in a sustained downtrend.

Investors who braced themselves for a second day of selling on the U.S. stock market were pleasantly surprised on Wednesday. Despite suffering a weak futures session, the Dow Jones Industrial Average (DJIA) rallied at the opening bell.

Wall Street is digesting more unnerving data as the pandemic sweeps America. On Wednesday, the U.S. tipped past 3 million coronavirus cases, with numbers rising in 37 states.

Despite the scary headlines, there is only one metric that will decide the Dow’s next move, according to Fundstrat analyst Tom Lee: daily deaths .

Cases are rising dramatically across the country, but deaths remain in a steady downtrend. The stock market’s next move depends heavily on how this trend resolves. Lee explains:

I think the market’s watching the cases rise but the deaths fall. Half of investors think [it’s] only temporary. And then the other half thinks it’s a persistent divergence. When that’s resolved, the market is going to start to reflect that.

Dow recovers after volatile futures session

It was a choppy overnight session on the futures market, but U.S. stocks turned higher once regular trading hours arrived. As of 10:17 am ET, all three major Wall Street indices were on their way to moderate gains.

The Nasdaq headlined the move with a 1.18% pop to 10,466.38. The S&P 500 followed behind with a 0.68% advance to 3,166.84.

The Dow Jones brought up the rear, though it still rallied 160.37 points or 0.62% to 26,050.55.

Mortality rate is a “sustained downtrend”

The death rate is a lagging indicator. It takes weeks for the virus to progress, so it’s no surprise to see the delay.

The key question is whether the huge spike in cases from early June turns into a spike in mortality in the coming days and weeks. Lee doesn’t think it’ll happen.

It’s our belief that it’s a sustained downtrend.

Why? He points to better healthcare provisions and better preparedness. The newer cases are also among younger patients who are less likely to experience severe symptoms.

We’ve “learned how to manage this better”

Dr. Deborah Birx, who serves as White House advisor, struck a similarly optimistic tone. In an interview last night, she said many more deaths can be avoided because we’ve learned how to deal with it better .

The clinical care has remarkably improved. We’ve learned from New York and New Jersey … We have additional therapeutics, so we’ve really learned how to manage this better earlier.

If Lee’s theory is correct, he says, we are “much further along in coming out of this crisis.”

And if that’s true, the financial markets will be less concerned about new lockdowns and restrictions.

It should be noted that Dr. Anthony Fauci isn’t convinced. He warned last night that mortality rate shouldn’t be the focus.

[It’s a] false narrative to take comfort in a lower rate of death.

He argues that doing so encourages risky behavior that may worsen the outbreak.

What next for the Dow Jones?

The rally off the March lows has been driven by FAANG and tech stocks. But Tom Lee sees a change in direction coming. If the pandemic is peaking, as he believes, then money should begin to flow back into cyclicals.

Tech stocks have acted almost as a defensive play during the crisis. A return to normal should see a rotation back into other sectors.

The ever-bullish JP Morgan CIO Mike Wilson has a similar take. Speaking to CNBC, he said he would double-down on growth stocks and cyclicals .

Leadership is growth stocks and, I would argue, some of these cyclicals stocks which have done quite well since late March, so we’re going to be buyers of those two areas, in particular, on whatever pullback we’re going to get this summer.

Watch out for a correction through July and August, he said, especially if Congress fails to deliver new stimulus measures.