The stock market is going through a clear rotation right now, as investors try to position their portfolios to take maximum advantage of what they hope will be improving conditions for the global economy. That's generally been bad news for the Nasdaq Composite (NASDAQINDEX:^IXIC) over the past few days, because market participants have apparently shifted away from the tech winners during the coronavirus pandemic and are instead investing in companies in sectors that don't have as large an influence in the Nasdaq stock market. Even as the Dow Jones Industrials flirted with 28,000 for the first time since before the bear market in March, the Nasdaq-100 and the Composite both lost ground.

That's not to say, though, that every Nasdaq-listed stock did poorly. News of advances in medical science fighting COVID-19 helped lift travel stocks, and that included online travel specialists Booking Holdings (NASDAQ:BKNG) and Expedia Group (NASDAQ:EXPE).

Travel resort with hotel, beach, boat, and people on a body of water.

Image source: Getty Images.

Why travel stock investors are optimistic

Shares of online travel stocks climbed sharply on Tuesday, fighting the broader downtrend on the Nasdaq. Expedia shares climbed more than 4%, while Booking investors had to settle for gains of roughly half that, up 2% on the day.

Travel stocks of all kinds were higher on news that the Russian government had approved a vaccine for COVID-19. Health experts in the U.S. and elsewhere pointed out that the vaccine hadn't gone through the full slate of clinical testing that would be required by the U.S. Food and Drug Administration and by similar regulatory bodies abroad. Early trials have involved only a small number of patients, and some fear that prematurely releasing an unproven vaccine could cause dangerous side effects or prove ineffective in fighting COVID-19.

Nevertheless, investors understand that people in general are aching to return to life as normal, and as soon as any viable vaccine becomes available, they're hoping to do all the traveling they've had to put off during the pandemic. The harder a sector got hit during the worst of the crisis, the more its stocks rose. Cruise ship stocks were among the best performers, while airlines gave up much of their early gains. Hotel operators were largely mixed after having been up sharply Tuesday morning.

A low bar to overcome

Also helping Booking and Expedia was that they've set expectations so low lately. Both companies have had huge headwinds that could last at least the rest of the year if not longer.

For instance, late last week, Booking Holdings released its second-quarter results. Revenue plunged 84% from year-earlier levels, sending net income down 88% year over year. Moreover, after adjusting for extraordinary items including gains on marketable securities, Booking's adjusted bottom line came in at a loss of $443 million. Room nights booked plunged from 213 million a year ago to just 28 million in the second quarter. Yet CEO Glenn Fogel pointed to improving trends late in the quarter that he hopes will help Booking build momentum into the second half of 2020.

Expedia saw similar pain. Revenue plummeted 82% in the second quarter, with a net loss of $753 million. Gross bookings were off more than 90% on an 81% drop in room nights booked. Expedia suffered a larger number of airfare cancellations than new flight bookings, causing the segment to have negative revenue. Advertising and media sales also suffered.

For travel stocks and the broader market, a lot depends on whether recent optimism bears out in reality. If things go well, then the industry could return to normal. If new speed bumps arise, though, then gains for Expedia and Booking Holdings could give way to renewed declines in the second half of the year.