U.S. stocks break a week of declines
The Dow Jones industrial average rocketed more than 600 points Wednesday, its biggest gain in seven years, snapping a six-day losing streak that had Americans nervously checking their investment balances.
While the surge came as a relief to many, Wall Street professionals warned that more rough days lie ahead, in part because of unsettled conditions in China, where signs of an economic slowdown triggered the sell-off that has shaken global markets over the past week.
Heading into Wednesday, the three major U.S. stock indexes had dropped six days in a row, the longest slide in more than three years. The Dow had fallen about 1,900 points over that period, while the slump wiped out more than $2 trillion in corporate value.
On Tuesday, a rally on Wall Street collapsed in the final minutes of trading, with the Dow closing more than 200 points lower. On Wednesday, the market opened strong again, and the question all day was whether the rally would hold. It did, and picked up speed just before the closing bell.
The Dow vaulted 619.07 points, or 4 percent, to 16,285.51. It was the Dow’s third-biggest point gain of all time and its largest since Oct. 28, 2008, when it soared 889 points.
The Standard & Poor’s 500 index, a much broader measure of the stock market, gained 72.90 points, or 3.9 percent, to 1,940.51. In percentage terms, it was the best day for the S&P 500 in nearly four years. The Nasdaq composite rose 191.05 points, or 4.2 percent, to 4,697.54.
Shares of General Motors Co. and Ford Motor Co. regained Tuesday’s losses, and then some. General Motors Co. stock closed up 84 cents, or 3.1 percent, to $28.12. Ford Motor Co. was up 32 cents, or 2.4 percent, to $13.22. And Fiat Chrysler Automobiles NV gained for a second straight day, up 40 cents, or 2.9 percent, to $14.44.
Still, their shares are considerably lower than the close of last Wednesday: GM is off 11.1 percent over the past week, Ford is off 10.5 percent and Fiat Chrysler is off 4.3 percent.
Wall Street professionals said investors apparently saw the big sell-off as an opportunity to go bargain-hunting and buy low. “That always leads to a bounce or spike in the market,” said Quincy Krosby, market strategist for Prudential Financial.
Another factor was believed to be a comment on Wednesday from the head of the New York Federal Reserve Bank, William Dudley, who said that because of the slowdown in China and other factors, the case for the Fed to raise rock-bottom interest rates next month for the first time in nearly a decade is “less compelling” than it was a few weeks ago.
“That certainly helped the market,” Krosby said.
The U.S. stock market has been on a run-up that has lasted more than six years and pushed the major indexes to all-time highs. Investors worry that the economy could falter if the Fed raises rates too soon.
Over the past few days, ordinary Americans with 401(k)s and other investments have been calling their financial advisers in search of some reassurance.
“I wouldn’t say it is full-blown panic,” said Brennan Miller, a branch manager for Charles Schwab in Chicago. “Markets have been steadily advancing for several years, and that breathed some complacency. This caught people off guard.”
Any sign that the market has bottomed out could encourage investors to get back in.
“There’s a lot of cash on the sidelines waiting to get in, so to the extent that there’s any sort of bottom seen, that will increase people’s confidence and boldness,” said Erik Davidson, chief investment officer for Wells Fargo Private Bank.
Still, the market has a ways to go before it recovers its run of recent losses. The Dow remains down 8.6 percent this year, while the S&P 500 is off 5.8 percent. The Nasdaq is down just 0.8 percent.
And despite Wednesday’s strong rebound, analysts said there are probably more roller-coaster days ahead, good and bad, because of China as well as worries about a Fed rate increase.
In international markets, major indexes in Germany, France and Britain fell anywhere from 1.3 to 1.7 percent. Markets in Asia were mixed. Japan’s Nikkei 225 stock index rose 3.2 percent. Hong Kong’s Hang Seng index fell 0.5 percent.
The price of oil fell back below $39 a barrel after a U.S. government report showed an unexpected decline in demand for gasoline. U.S. government bond prices fell, and the yield on the 10-year Treasury note rose to 2.18 percent.
The Detroit News contributed to this story.
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