Market report

Stocks pull out of dive; Dow up 619

S&P; 500, Nasdaq join surge to end six-day market rout

Trader Kevin Walsh works to keep up with the activity Wednesday on the floor of the New York Stock Exchange.
Trader Kevin Walsh works to keep up with the activity Wednesday on the floor of the New York Stock Exchange.

NEW YORK -- An afternoon surge Wednesday gave the U.S. stock market its best day in nearly four years, as stocks rebounded from a six-day slump.

The three major U.S. indexes dropped six days in a row heading into Wednesday on concern that China's economy is weaker than investors had previously thought. That was the longest market slide in more than three years.

The Dow Jones industrial average fell about 1,900 points over that period, while the slump wiped more than $2 trillion off the value of Standard & Poor's 500 index companies.

On Wednesday, the Dow rose 619.07 points, or 4 percent, to 16,285.51. The S&P 500 index gained 72.9 points, or 3.9 percent, to 1,940.51, giving the index its best day since November 2011. The Nasdaq composite gained 191.05 points, or 4.2 percent, to 4,697.54.

"It's definitely a positive to see markets move higher," said Tom Manning, chief investment officer from Boston Private Wealth, which oversees about $9 billion in assets. "I don't know that we found the bottom. I'm not convinced we don't have more negative days to follow. We're not likely to go from extreme volatility to extreme calm overnight."

Markets have been volatile since China decided to weaken its currency earlier this month. Investors interpreted the move as an attempt to bolster a sagging economy.

Traders are also jittery about the outlook for interest rates. The Federal Reserve has signaled it could raise its key interest rate for the first time in nearly a decade later this year.

New York Fed Reserve Bank President Bill Dudley said Wednesday that the case for a rate increase next month had become "less compelling", which may have added fuel to the market gains. However, he also stated that the situation could still change before the Fed's next policy meeting in mid-September.

"The stock market has to move a lot -- and stay there -- to have implications for the U.S. economy," Dudley said. "This is very different from the financial crisis."

Investors on Wednesday also were following the latest corporate deal and earnings news. Technology stocks were among the biggest gainers. Shares of Apple Inc., Google Inc. and Intel Inc. rose at least 5.5 percent. Amazon.com Inc. surged 7.4 percent, and Netflix Inc. posted a two-day gain of 14 percent.

While Wednesday's surge came as a relief to many, Wall Street professionals warned that more rough days lie ahead. Investors apparently saw the big sell-off as an opportunity to go bargain hunting and buy low. "That always leads to a bounce or spike in the market," said Quincy Krosby, market strategist for Prudential Financial.

"This type of short-term rally shouldn't be much surprise given recent weakness," said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, N.J., which oversees about $170 billion. "Eventually the reality that valuations have come off so much will come into play."

The U.S. stock market has been on a run-up that has lasted more than six years and pushed the major indexes to all-time highs. Investors worry that the economy could falter if the Fed raises rates too soon.

Over the past few days, ordinary Americans with 401(k)s and other investments have been calling their financial advisers in search of some reassurance.

"I wouldn't say it is full-blown panic," said Brennan Miller, a branch manager for Charles Schwab in Chicago. "Markets have been steadily advancing for several years, and that breeds some complacency. This caught people off guard."

The market has a ways to go before it recovers its run of recent losses. The Dow remains down 8.6 percent this year, while the S&P 500 is off 5.8 percent. The Nasdaq is down just 0.8 percent.

In China on Wednesday, the Shanghai composite index fell 1.3 percent to 2,927.29. The benchmark measure closed with a 7.6 percent drop on Tuesday.

"China has a stock market bubble, an economy that is slowing, they have to manage all this, and it's not going to be a smooth sailing," said Howard Ward, chief investment officer of growth equities at Mario Gabelli's Gamco Investors Inc., which oversees $45.4 billion in Rye, N.Y.

"China isn't growing at 7 percent, maybe it's growing at 3 percent, and maybe it's not growing at all -- nobody knows," Ward said.

Chinese equities have lost half their value since mid-June.

"The prevailing sentiment is still that investors want to cash out, whatever the [Chinese] government does," said Ronald Wan, chief executive at Partners Capital International in Hong Kong.

"Confidence is already damaged. Doubts over the effectiveness of policies are getting bigger. The market will remain under selling pressure for a while."

In international markets, major indexes in Germany, France and Britain fell anywhere from 1.3 percent to 1.7 percent. Markets in Asia were mixed. Japan's Nikkei 225 stock index rose 3.2 percent. Hong Kong's Hang Seng index fell 0.5 percent.

The price of oil fell back below $39 a barrel after a U.S. government report showed an unexpected decline in demand for gasoline. U.S. government bond prices fell, and the yield on the 10-year Treasury note rose to 2.18 percent.

Information for this article was contributed by Alex Viega, Steve Rothwell and Ken Sweet of The Associated Press; by Joseph Ciolli, Anna-Louise Jackson, Kyoungwha Kim, Maria Levitov and Elena Popina of Bloomberg News; and by Peter Eavis, Neil Gough and David Jolly of The New York Times.

A Section on 08/27/2015

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