Investors returned from the Christmas holiday break in a buying mood Wednesday, sending U.S. stocks sharply higher and placing the market on track for its best day in nine months.
Gains in technology companies, retailers, health care and internet stocks drove the broad rally, which erased much of the market’s losses from a steep drop on Monday. That sell-off left the benchmark S&P 500 index on the edge of what Wall Street calls a bear market.
“This is a market that’s heavily oversold, and typically you expect a strong bounce following that,” said Quincy Krosby, chief market strategist at Prudential Financial. “Oil prices have just moved quite markedly. And retail is having a very strong holiday season.”
The S&P 500 index rose 59 points, or 2.5 per cent, to 2,410 of 12:55 p.m. Eastern Time. The Dow Jones Industrial Average climbed 521 points, or 2.4 per cent, to 22,338. The tech-heavy Nasdaq gained 215 points, or 3.5 per cent, to 6,408. The Russell 2000 index of smaller-company stocks picked up 30 points, or 2.4 per cent, 1,297.
Trading volume was lighter than usual following the Christmas holiday. Markets in Europe, Hong Kong and Australia were closed.
U.S. crude oil prices were on track for their biggest one-day gain in more than two years.
Benchmark U.S. crude climbed 7.5 per cent to $45.73 a barrel in New York. Brent crude, used to price international oils, gained 6.9 per cent to $54.26 a barrel in London.
The pickup in oil prices helped boost energy stocks. Marathon Petroleum rose 4.2 per cent to $56.62.
Wednesday’s gains provide the S&P 500 some breathing room after finishing the shortened trading session Monday just shy of a 20-per cent drop from its peak three months ago. Should the index cross that threshold and slide into a bear market, it would mark the end to the longest bull market for stocks in modern history after nearly 10 years.
Stocks fell sharply Monday after President Donald Trump lashed out at the central bank. Administration officials had spent the weekend trying to assure financial markets that Fed chairman Jerome Powell’s job was safe. On Tuesday, Trump reiterated his view that the Federal Reserve is raising interest rates too fast, but called the independent agency’s rate hikes a “form of safety” for an economy doing well.
“The market is trying to find an equilibrium between earnings, revenue growth and the economy, but when you have an onslaught of headlines that just manifest uncertainty from Washington, it just feeds negative sentiment,” Krosby said.
The market’s sharp downturn since October intensified this month, erasing all of its 2018 gains and nudging the S&P 500 closer to its worst year since 2008. Despite Wednesday’s rally, stocks are on track for their worst December since 1931, during the depths of the Great Depression.
Technology stocks accounted for much of Monday’s early bounce. Adobe rose 6.1 per cent to $217.68. Payment processors Visa and Mastercard also headed higher. Visa added 4.5 per cent to $127.24, while Mastercard gained 4.2 per cent to $182.05.
Big retailers were among the gainers. Amazon climbed 6.9 per cent to $1,436.09. Kohl’s gained 7.3 per cent to $64.18. Nordstrom picked up 4.4 per cent to $46.13.
Homebuilders mostly rebounded after an early slide following a report indicating that annual U.S. home price growth slowed in October. PulteGroup climbed 1.1 per cent to $24.96.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.78 per cent from 2.75 per cent late Monday.
The dollar strengthened to 110.98 yen from 110.41 yen on Monday. The euro weakened to $1.1361 from $1.1404.
The partial U.S. government shutdown that started Saturday is unlikely to hurt the economy much, although it may deprive the financial markets of data about international trade and gross domestic product. The Bureau of Economic Analysis said Wednesday that it’s required to suspend all operations until Congress approves funding, which means that the government might not release its fourth-quarter report on gross domestic product as scheduled for January 30.
In other trading Wednesday, South Korea’s Kospi gave up 1.3 per cent, while Japan’s Nikkei 225 index, which plunged 5 per cent on Tuesday, picked up 0.9 per cent. Shares fell in Taiwan, Singapore and Indonesia, but rose in Thailand.