Stocks mount biggest Wall Street comeback in years; S&P 500 jumps 2.6%

NEW YORK >> Wall Street staged its biggest comeback in years Thursday, as stocks roared back from steep morning losses caused by a worse-than-expected report on inflation.

The S&P 500 jumped to a gain of 2.6%, a stunning reversal after earlier being down as much as 2.4% and touching its lowest level in nearly two years. The Dow Jones Industrial Average swung more than 1,500 points from its low to its high. The turnarounds were the biggest for each index since March 2020.

Other markets around the world likewise veered sharply from losses to gains, while analysts offered possible reasons for the reversal but little that was concrete.

Besides stocks, prices also initially tumbled for bonds and cryptocurrencies in the knee-jerk reaction to a disappointing report from the U.S. government, which showed inflation is spreading more widely across the economy. One component that’s closely followed by policy makers and investors accelerated to its hottest level in 40 years.

That forced investors to brace for continued, big hikes to interest rates by the Federal Reserve to get inflation under control, and the potential recession those moves could create. The Dow Jones Industrial Average fell as many as 549 points shortly after the report’s release, and the Nasdaq was down as much as 3.2%.

The slump didn’t last. Stocks shot up, driving the Dow up 827.87 points, or 2.8%, at 30,038.72. The Nasdaq climbed 232.05 points, or 2.2%, at 10,649.15. The benchmark S&P 500, which was briefly up 3%, rose 92.88 points to 3,669.91. The gains ended a six-day losing streak for the S&P 500 and Nasdaq.

Smaller company stocks also rallied after an initial slide. The Russell 2000 rose 40.65 points, or 2.4%, to close at 1,728.41.

“Anybody who had a hope of a pivot or a pause or a slowing in Fed policy tightening for the next meeting, that’s been dashed today,” said Liz Young, chief investment strategist at SoFi. “I literally can’t even wrap my head around what the logic would be to buy (stocks) on any change in Fed policy.”

Stocks in Europe also flipped from losses caused by the U.S. inflation data, while Treasury yields pulled back a little from their initial surge. The value of the U.S. dollar against other currencies sank after initially jumping.

They’re the latest jagged, back-and-forth moves for markets, which have been swinging sharply due to all the uncertainties about economies around the world and how badly higher interest rates will hurt them.