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Dow soars 600 points as stock market bounces back

A Wall St. sign next to the New York Stock Exchange (NYSE) September 16, 2008 in New York City. U.S. stocks continued to drop Tuesday morning for the second consecutive day, following yesterday's Dow Jones Industrial Average plunge of 4.4% or 504 points, being the worst single day loss since the terrorist attacks of September 2001. Today the Federal Reserve is scheduled to announce the target interest rates for the federal funds. It's not clear how the central bank will respond to recent turmoil in the world's financial markets. This comes after news of Merrill Lynch & Co. Inc selling itself to Bank of America Corp, the financial firm Lehman Brothers Holdings Inc. filing for Chapter 11 bankruptcy protection, and insurance giant American International Group Inc. (AIG) attempting to raise capital to stay afloat. (Photo by Spencer Platt/Getty Images)

(CNN) — Markets rebounded sharply from a disastrous Christmas Eve.

The Dow rose as much as 600 points Wednesday. The S&P 500 rose 2% and Nasdaq was up about 3.1%.

Wednesday was a rare respite from a very rough month for investors. The Dow was on pace for its best day of the year, but the stock market remains poised for its worst December since 1931.

“Investors went bargain shopping the day after Christmas, where stocks just got too cheap relative to earnings, future earnings, any reasonable assessment of earnings,” said Chris Rupkey, managing director of MUFG. “The coast is clear, back up the truck, investors are saying enough already, the world is not ending.”

Thin trading and a lack of big news often send stocks higher in the last week of December.

Stocks rose higher despite virtually no news — which may have been a catalyst in its own right. President Donald Trump has not tweeted Wednesday. Shortly after 2 pm ET, the White House announced Trump and the first lady traveled to Iraq on Wednesday. Recently, Trump has unsettled markets by signaling the potential firing of Federal Reserve Chairman Jerome Powell and a trade war escalation.

One piece of good news: Mastercard (MA) and Amazon (AMZN) both reported robust holiday season sales, suggesting rising wages and lower gas prices are helping boost consumer spending — the biggest contributor in America’s GDP.

But investors weighed that against a dour housing report from S&P/Case-Shiller, which showed the growth in home prices was at a two-year low. Shares of department store JCPenney (JCP) dipped below $1 for the first time and Ford (F) stock was down as much as 9% this week.

One good day isn’t a trend

The S&P 500 remains close to entering a bear market, ending the longest bull market in history. The Nasdaq is already in a bear market.

A partial government shutdown, Treasury Secretary Steven Mnuchin’s questions about banks’ health and signals that President Donald Trump could fire Federal Reserve Chairman Jerome Powell upset markets on Monday, sending the Dow down 653 points.

After markets tanked on Christmas Eve, Trump said Tuesday that he remains confident in Mnuchin, but he renewed his criticism of the Fed, accusing it of hiking rates too fast.

Those doubts come of top of worries about how sharply the US economy might lose steam next year.

“The markets are in panic mode that the US economy is tanking,” Stephen Innes, head of Asia-Pacific trading for online broker Oanda, said. “If the US economy turns south, global capital markets are in for a world of hurt.”

The only certain thing about the market this month is uncertainty. The slightest bit of bad news can turn a rally into a rout. For example, stocks were up nearly 400 points on Friday but ended the day down more than 400 points.

Asian markets rattled

In Asian markets, Japan’s Nikkei swung between gains and losses Wednesday before closing up nearly 1%. The shaky trading followed a 5% plunge on Christmas Day that dragged the Japanese index into a bear market. In China, the Shanghai Composite shed 0.3% on Wednesday.

Fears about slowing economic growth have been exacerbated by a series of unsettling moves from Washington in recent days.

The turmoil in Washington is making traders in other countries fret about the stewardship of the world’s biggest economy.

“Japanese investors are absolutely shocked by the lack of the leadership team in Washington,” Jesper Koll, head of Tokyo-based investment fund WisdomTree Japan, told CNN. “The reality is that the president no longer has a team of credible leaders to manage the American and the global economy.”

Global investors already had a laundry list of worries, including China’s slowing economy, the Trump administration’s trade war with China and the unpredictability surrounding Brexit.

“There’s a lot of uncertainty, and that’s one of the biggest things that the market doesn’t like,” Andrew Sullivan, a Hong Kong-based market economist, told CNN.

Some of the world’s biggest markets are yet to react to Wall Street’s Christmas Eve sell-off. Stock exchanges in London, Frankfurt, Hong Kong and Australia remain closed and will have to digest the recent turmoil when they reopen Thursday.

The-CNN-Wire
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