NEW YORK — U.S. stocks raced higher on Wednesday even as deep concerns about China’s impact on the global economy continue to hang over the market.
The Dow was up about 500 points with less than an hour of trading remaining. If it closes at these levels, the Dow would achieve its biggest one-day point gain since 2008.
Investors are wondering whether the big gains will stand — or whether a repeat of Tuesday will occur. That’s when a 442-point surge on the Dow turned out to be a big head fake, with the rally turning into a selloff by the end of the day.
Wall Street is currently on track to avoid a rare seven-day losing streak. That’s something that hasn’t happened to the S&P 500 since late 2011.
“This is investors being opportunistic and buying on the weakness. Unless you think there’s going to be some massive slowdown in the economy, all of a sudden equities at these levels look attractive again,” said Lori Heinel, chief portfolio strategist at State Street Global Advisors.
There might be bargains to be had given that for the first time in four years all three major U.S. indexes have tumbled into correction mode — signaling a 10% decline from recent highs.
The turbulent market moves are further evidence of fears about how China’s economic slowdown will impact the rest of the world.
Global markets turmoil eases
But global markets — other than China — seemed a bit calmer on Wednesday. While the Shanghai Composite retreated another 1.3%, Japan’s stock market soared 3% and European markets held steady after Tuesday’s big gains.
Earlier this week China sought to calm turmoil in global markets by slashing interest rates. The hope is the moves will help stabilize China’s economy and ease fears that the world’s second largest economy is slowing drastically.
Time for a rebound?
Market veterans believe the U.S. stock market is due for a rebound given the scale of losses in recent days. An eye-popping $2.1 trillion of value has been wiped out from the S&P 500 in just the previous six trading days alone, according to S&P Dow Jones Indices. The S&P 500 is on track for its worst monthly decline since 2009 during the end of the global financial crisis.
“Steep declines are unlikely to continue much longer in the very near term given the extremes we’re at right now,” analysts at Bespoke Investment Group wrote in a report on Wednesday.
Tech stocks were at the heart of Wednesday’s rebound. Shares of Netflix, Google and Amazon all rallied sharply. Other big winners include Abercombie & Fitch and Express after both retailers reported profits that exceeded expectations.
U.S. economy looks better than the stock market
The American stock market tumble stands in sharp contrast with sentiment about the U.S. economy.
The economy appears to be on track to continue its expansion from the Great Recession, even though growth may not be stellar.
Further evidence of that was received on Wednesday. The government said orders for big-ticket items like appliances and cars jumped by 2% in July from June. That was significantly more than economists had anticipated.
Crude oil prices struggled to follow the broader markets higher. Oil retreated to about $39 a barrel, leaving it down 17% this month alone.