STOCKS SHOOT UP AFTER ROCKY RIDE
U.S. stocks closed higher yesterday, rallying on a late-session surge to rebound from Monday’s worst losses in six-anda-half years for the Standard & Poor’s 500 index and Dow Jones industrial average.
The stock market closed sharply higher following another rocky trading day of wild price swings that saw the Dow fall 567 points after the opening bell before closing with a 567-point gain — the largest in two years.
The Dow finished the day 567.02 points higher, or 2.3 percent, to close at 24,912.77, recovering about half the losses from its 1,175-point nosedive Monday. The S&P 500 index, a broader market measure tracked by many index funds, moved up 46.20 points, or 1.7 percent, to close at 2,965.14. The Nasdaq composite rose 148.36 points, or 2.1 percent, to 7,115.88.
It’s not surprising the market roared back yesterday based on fundamentals that are driving the economy, according to Al Zdenek, founder and CEO of Princeton, N.J.-based Traust Sollus Wealth Management.
“There are very few things in the economy that are not good news,” Zdenek said. “The thing is, when the market rises this quickly, it gets ahead of itself a bit. So it’s a healthy thing when the market corrects.”
Stocks can easily go down for no good reason, but they don’t stay down for no reason, said Brian Jacobsen, senior investment strategist of multiasset solutions at Wells Fargo Asset Management/ Wells Capital Management. A whiff of inflationary fears that triggered a sell-off in Treasuries on Friday meant that some traders had to change the mix of stocks and bonds in their computer algorithmic trading strategies, triggering equities to sell off on Monday.
“This snowballed as volatility rose,” Jacobsen said. “When volatility spiked, that trade went out the window. After the unwind of those trades, you typically get a rebound, which is what we had (yesterday).”
People buying on the fundamentals will trump those selling on the technicals, Jacobsen said.
“Sometimes that happens quickly and sometimes that can take a while,” Jacobsen said. “So far, it looks like this time it happened rather quickly.”
The wild up-and-down market swings are consistent with a bottoming process, but the market will likely continue to be volatile, so investors have to be “in it to win it,” said Greg McBride, chief financial analyst at Bankrate.com.
“Focus on the long term rather than the noisy, dayto-day movements,” he said. “The stock market is for long-term wealth creation, it’s not a get-richquick scheme. Thinking you can time the market is a futile exercise.”