U.S. stocks rebound from selloff as odds of Fed rate cut improve

Technology and health care companies helped U.S. stocks rebound broadly from an early selloff Thursday, snapping the market’s steep twoday skid.

The Dow Jones Industrial Average swung from a loss of more than 330 points to a gain of more than 120 after another disappointing economic report raised expectations among investors that the Federal Reserve will cut interest rates again to help keep the U.S. economy growing. The S&P 500 and Nasdaq also recovered from the early rout.

Traders were jolted by surprisingly slow growth in the U.S. services sector last month, the weakest in three years. That followed troubling news on business hiring and manufacturing earlier this week that knocked the market lower.

“The market is saying rate cuts are good, this data increases the likelihood of rate cuts, so maybe we overreacted a little bit in terms of selling off,“said Willie Delwiche, investment strategist at Baird.

The S&P 500 index rose 23.02 points, or 0.8 percent, to 2,910.63. The Dow gained 122.42 points, or 0.5 percent, to 26,201.04. The Nasdaq, which is heavily weighted with technology stocks, climbed 87.02 points, or 1.1 percent, to 7,872.26. The Russell 2000 index of smallcompany stocks gained 6.72 points, or 0.5 percent, to 1,486.35.

While stock prices recovered from their early stumble, investors continued to shift money into the relative safety of U.S. bonds. That drove bond prices higher, lowering their yields. The yield on the 10year Treasury fell to 1.54 percent from 1.59 percent late Wednesday.

Stocks are off to a turbulent start in October. The benchmark S&P 500 is down 2.2 percent for the month so far, wiping out all the index’s gain from September.

Investors are wrestling with uncertainty about the economy, mostly due to the costly and longrunning trade war between Washington and Beijing. The market slumped early Thursday after investors weighed the latest signal of U.S. economic weakness.

The Institute for Supply Management, an association of purchasing managers, said that its nonmanufacturing index sank to 52.6 from 56.4 in August. Readings above 50 signal growth, but September’s figures are the lowest since August 2016.