U.S. Stocks Rise as Investors Look for Floor After 6-Day Selloff

U.S. Stocks Rise as Investors Look for Floor After 6-Day Selloff

Joseph Ciolli Roxana Zega

August 26, 2015 — 7:09 AM HKT Updated on August 26, 2015 — 9:58 PM HKT


U.S. stocks advanced, amid their steepest losing streak in four years, as investors made another go at finding a floor after yesterday’s early rally evaporated.
The Standard & Poor’s 500 Index climbed 2 percent to 1,905.26 at 9:56 a.m. in New York, on track for its best gain since December. The Dow Jones Industrial Average added 305.72 points, or 2 percent, to 15,972.16. The Nasdaq Composite Index gained 2.1 percent, also headed for its strongest increase this year.
“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, New Jersey, which oversees about $170 billion. “But nonetheless, investors are resetting their global growth expectations, and that’s having a deleterious effect in the longer term. The acceleration of the situation has investors on edge.”

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A rebound that took the Dow up more than 440 points on Tuesday disappeared in the final hour of trading, with investors giving in to trepidation over what would happen overnight in China. The S&P 500 went from up 2.9 percent to down 1.4 percent. The Shanghai Composite Index closed down 1.3 percent, erasing an advance of as much as 4.3 percent.
After yesterday’s reversal, traders remain cautious. “Given the volatility, you cannot expect the way we open the market is the way we’ll close the market,” said Jasper Lawler, London-based market analyst at CMC Markets Plc. “Yesterday just goes to show that.”
More than $2 trillion has been erased from American equity values since the S&P 500 started its losing streak, breaking a calm in a stock market that had gone almost four years without a 10 percent correction. The measure has plunged 11 percent in six days, the most since the U.S. was stripped of its AAA credit rating by S&P in August 2011.
1% Away
The benchmark gauge for U.S. equities closed Tuesday 1 percent away from erasing its gains since the end of 2013 and about 5 points above the lowest level of its last big tumble, on Oct. 15. A measure of market turbulence known as the VIX is near its highest level since October 2011 after it posted a record six-day jump.
The recent turmoil in global markets sparked by growth concerns has reduced expectations for the Federal Reserve to increase interest rates as soon as next month. Traders are pricing in a roughly one-in-four chance the central bank will act at its September meeting, down from almost even odds before China’s surprise currency devaluation earlier this month.
Data today showed orders for capital goods increased in July by the most in more than a year, showing corporate spending was finding its footing prior to the turmoil in financial markets. Orders for all durable goods -- items meant to last at least three years -- rose 2 percent, exceeding all forecasts of economists surveyed by Bloomberg.