Dow jumps 1,086 from edge of bear
Throughout Wall Street’s December meltdown, analysts have been saying that markets were plunging despite plenty of evidence that the U.S. economy remains strong and corporate profit growth is healthy.
That argument finally found listeners Wednesday, when early reports of a strong holiday-shopping season helped lift the S&P 500 by nearly 5 percent, its best day since 2009. The Nasdaq added 5.8 percent, and the Dow Jones industrial average rose just under 5 percent. That jump, over 1,086 points, represented the Dow’s best single-session gain ever, although a number of days have eclipsed that in percentage terms.
A substantial rise in crude oil prices added to the lighter mood, as did efforts from the White House to ease up on criticism of the Federal Reserve.
The rebound offered investors a much-needed reprieve from a decline that had picked up speed in December. Stocks had fallen for four consecutive days through Monday, and the drop had pushed the S&P 500 to within just a few points of a bear market – defined as a 20 percent retreat from its high.
Still, the S&P 500 is on pace for its worst annual performance since the financial crisis a decade ago and is only back to where it stood on Dec. 20. Plus, the move in prices Wednesday was most likely heightened by lighter-than-average trading volume during a holiday week.
But to some traders, the move upward finally made sense.
“Fundamentally you’ve got good growth here in the States, you have reasonable growth overseas, you’re going to have record earnings in 2019 and possibly in 2020 as well, you’ve got low inflation,” said Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute. Before Wednesday’s steep rise, the market had fallen too far, Wren said, and it was ready to climb thanks to the underlying strength of the U.S. economy.
All told, according to Associated Press reports, the S&P 500 index rose 116.60 points, or 5 percent, to 2,467.70. The Dow soared 1,086.25 points, or 5 percent, to
22,878.45. The tech-heavy Nasdaq gained 361.44 points, or 5.8 percent, to 6,554.36. The Russell 2000 index of smallercompany stocks picked up 62.89 points, or 5 percent, 1,329.81.
The rally was broadbased. Only one stock in the S&P 500, Newmont Mining, fell.
Data from Mastercard showed that sales in the United States this holiday season grew at their fastest pace in six years, and investors flocked to the retail sector. Stock in the department store Kohl’s jumped over 10 percent, and shares of Amazon, which called its season “record-breaking” without offering financial details, rose more than 9 percent.
The rally doesn’t mean that this year’s precipitous decline in stock prices is over. Signs of economic health that encouraged the buying are doing little to address one of stock investors’ primary concerns. They’re worried that the Federal Reserve’s decision to continue raising interest rates, even if at a slightly slower pace, will hurt the economy and corporate profits. Higher interest rates on bonds or even savings accounts make stock investments less appealing as an alternative.