Dow jumps almost 600 factors because the 2-day comeback rally pushes key indices into the inexperienced for the week
US stocks rose for a second day as fears of a crisis in China’s housing market eased and the Federal Reserve held current monetary stimulus just a little longer.
The Dow Jones Industrial Average gained 582.12 points, or 1.7%, on steady buying throughout the trading day. Thursday’s rally added 338 points to the previous session. The S&P 500 was up 1.5% and the Nasdaq Composite was up 1.1%.
Thursday’s gains pushed key averages back into the green for the week. The Dow and S&P are now up 0.7% and 0.6% respectively, while the Nasdaq is up 0.2% over the course of the week.
The Dow lost more than 600 points on Monday and fell again on Tuesday as worries over a possible collapse of Chinese developer Evergrande Group hit the global economy. But Hong Kong’s Hang Seng index rebounded more than 1% overnight, with Evergrande gaining more than 17% as investors appeared to be betting that China would not allow a complete failure of the key company and add more liquidity to the market .
And the US market received additional boost from the Fed on Wednesday afternoon as the central bank said it would not lift stimulus policies immediately. The central bank issued a statement following the meeting saying that if progress continues “as expected” then “moderation in asset purchases may soon be warranted”.
“The course of the economy was uncertain and the Fed instilled some confidence in the markets yesterday,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “In addition, other risks that have weighed on investor sentiment, such as the debt ceiling and risks associated with China’s real estate market, appear to be fading, which has increased investor risk appetite.”
Salesforce runs the Dow
Salesforce topped the Dow, up 7% after the cloud company raised its revenue forecast for full year 2022. Darden Restaurants was among the big S&P movers, up more than 6% after reporting strong quarterly earnings.
Global recovery-related stocks were also higher as fears from China eased. General Electric’s shares were up about 5%. Las Vegas Sands, which has a large exposure to China, rose 4%. Caterpillar added 3%.
Energy stocks led the S&P, with APA Corp up 7% and Devon Energy nearing 7%, while US crude oil futures West Texas Intermediate (WTI) rose to $ 73.50 a barrel, the highest since August 2nd.
Bank stocks rebounded as 10-year government bond yields rose, which may have boosted their profits. JPMorgan, Bank of America and Citibank gained around 3%. Regional banks like Regions and Fifth Third, which tend to trade closely with interest rates due to their reliance on lending, gained more than 4%.
Waiting for the Evergrande bond to be paid
On Wednesday, Evergrande eased fears somewhat by deciding to pay a local bond. However, global investors are still waiting to see if the company will pay $ 83 million in interest on a US dollar bond due Thursday. State regulators have ordered Evergrande to avoid short-term dollar bond defaults, Bloomberg News reported, citing a familiar. However, some Evergrande bondholders weren’t expecting payment Thursday and hadn’t heard from the company, Reuters reported.
As the trading day progressed, investors largely ignored the Evergrande crisis. And they kept buying even after weekly jobless claims rose faster than expected last week, showing that the strength of the US recovery is still questionable.
“While there could be some additional turmoil this fall, we are generally constructive about the US economy and believe that it would be worth buying any dips as fundamentals are still solid and the recession is more than at this point Seems like a year away, ”said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance.
After Thursday’s gains, the S&P 500 fell just 1.4% in September.
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