U.S. stocks extend recovery after Chinese market surges

Alex Veiga
Associated Press

Investors were in a buying mood again on Thursday, driving U.S. stocks higher for the second straight day as they took advantage of this month’s sell-off.

The rally came a day after the stock market delivered its biggest gain in almost four years, ending a steep six-day slump that was triggered by concerns about the health of the Chinese economy.

Energy stocks surged as the price of U.S. oil jumped more than 10 percent, closing back above $40 a barrel.

Investors were encouraged by a big gain in the Chinese stock market as the nation’s main index logged its biggest gain in eight weeks. They also welcomed a report indicating that the U.S. economy expanded at a much faster pace than previously estimated in the second quarter.

But mostly it was the opportunity to pick up shares that had been beaten down in the sell-off that drove the rebound. By Tuesday, the Standard & Poor’s 500 index had tumbled more than 10 percent from the all-time high that it reached in May.

“Asset prices sold off so much and so drastically, people went in and did start to bottom-fish,” said David Lyon, global investment specialist at J.P. Morgan Private Bank in San Francisco.

The Dow Jones industrial average climbed 369.26 points, or 2.3 percent, to 16,654.77. The index has recouped almost 1,000 points in the last two days. That’s more than half of its losses during a sharp six-day slump.

The S&P 500 index gained 47.15 points, or 2.4 percent, to 1,987.66. The Nasdaq composite rose 115.17 points, or 2.5 percent, to 4,812.71.

Thursday’s market action pushed the three indexes into positive territory for the week and nudged the Nasdaq out of the red for the year. The tech-heavy index is now up 1.6 percent for the year, while the Dow and the S&P 500 are still lower.

Shares of General Motors Co. and Ford Motor Co. regained some of the ground they lost in the last week. GM stock was up 50 cents or 1.8 percent, to $28.60 on Thursday. Ford was up 35 cents or 2.7 percent, to $13.56. Fiat Chrysler Automobiles NV slid 5 cents or 0.4 percent to $14.40.

Financial markets have been volatile since China decided to weaken its currency earlier this month, a move investors interpreted as an attempt to bolster a sagging economy.

But on Thursday the news out of China was more positive. The Shanghai Composite Index rose 5.3 percent, its first gain in six days. The index is rebounding from losses that triggered worldwide selling and wiped nearly 23 percent off its value over the past week.

Traders are also jittery about the outlook for interest rates. The Federal Reserve has signaled it could raise its key interest rate for the first time in nearly a decade later this year.

William Dudley, president of the New York Federal Reserve Bank, said Wednesday that the case for a U.S. interest rate hike in September is “less compelling” given China’s troubles, weak oil prices and emerging markets weakness.

Stocks picked up early on Thursday as investors reacted to the rebound in the Chinese stock market and European stock indexes.

The Commerce Department provided a surprise boost, reporting that the economy, as measured by gross domestic product, expanded at an annual rate of 3.7 percent in the April-June quarter. That’s a much bigger rebound in growth during the spring that previously estimated.

The report gave investors comfort that the global economy isn’t headed for the kind of downturn that could lead into a recession, said Lyon.

“It’s an adjustment to a global slowdown where the globe is just going to be growing at a low-to-moderate pace,” he said.

All of the 10 sectors in the S&P 500 rose, led by energy stocks. The sector rose 4.9 percent, paring its losses for the year to 20 percent.

Freeport-McMoRan notched the biggest gain in the index. The copper producer said it is cutting spending, production and jobs as it deals with declining copper prices. Its stock climbed $2.27, or 28.7 percent, to $10.19.

Markets overseas also mounted rallies.

Germany’s DAX gained 3.2 percent. France’s CAC-40 increased 3.5 percent. Britain’s FTSE 100 rose 3.6 percent.

In other Asian stock trading, Hong Kong’s Hang Seng advanced 2.9 percent to 21,697.31 and Tokyo’s Nikkei 225 added 1.1 percent to 18,574.44.

U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 2.19 percent from 2.18 percent on Wednesday.