Dow Jumps 293: Wall Street Rebounds as China Fears Ease

U.S. stocks rallied, after the Standard & Poor’s 500 Index posted one of its steepest drops this year, amid a respite from a global equities selloff.

After pacing the rout yesterday, technology shares led the rebound as Apple Inc. and Microsoft Corp. rose more than 3.6 percent. H&R Block Inc. jumped 7.5 percent after announcing a stock buyback plan. McDonald’s Corp. and Home Depot Inc. added at least 2.7 percent. A gauge of U.S. airlines rallied the most in more than seven months. Energy shares erased a decline along with oil, with crude closing higher after lurching between gains and losses.

A surge in the final minutes pushed the S&P 500 up 35.01 points, or 1.8 percent, to 1,948.86 at 4 p.m. in New York, closing at the session high after the gauge fell 3.8 percent over the previous two sessions. Equities jumped in early trading and then trimmed their gains by more than half before an afternoon rebound along with oil prices. The Dow Jones Industrial Average added 293.03 points, or 1.8 percent, to 16,351.38. The Nasdaq Composite Index gained 2.5 percent.

“China’s going to be closed the next few days and that means there won’t be this negative lead-in to markets in the morning so that will be a nice reprieve,” said Stephen Carl, principal and head equity trader at Williams Capital Group LP. “The date for a potential rate raise is certainly going back and forth and with the recent volatility in the market and situation overseas, people don’t have much conviction on when it will be.”

The benchmark equity gauge’s 3 percent decline on Tuesday — its third-biggest of 2015 —
 marked a sour start to what has historically been the worst month of the year. The S&P 500 falls 1.1 percent on average in September, according to data compiled by Bloomberg going back to 1927.

Another troubling sign is that futures on Chicago Board Options Exchange Volatility Index have climbed, showing traders predict turbulent markets will endure. The gauge known as the VIX fell 17 percent Wednesday to 26.09, after a record monthly jump in August,up 135 percent.

The S&P 500 slumped 6.3 percent last month as China’s currency devaluation spurred concern over global growth, erasing more than $5.7 trillion in equity market values worldwide, while volatility surged the most on record. The equity index entered a correction last week, only to then rally more than 6 percent over two days. It closed Wednesday 8.5 percent below its all- time high set in May.

Chinese shares closed lower on the last trading day of this week as investors assessed the level of state support before a major military parade on Thursday. Mainland markets will be closed Thursday and Friday to commemorate the end of World War II.

“Volatility will stay high for a while,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit in Hellerup, Denmark. “China is still making people panic and a lot of us are concerned that we’ll break the lows from last week. But many companies are starting to look very cheap now and the market will eventually find a support level, especially if the Fed doesn’t raise rates this month.”

Amid continuing concerns that China’s slowdown will weigh on the global economy, traders are now pricing in a 32 percent chance that the Federal Reserve will raise interest rates this month, down from 38 percent on Monday. Policy makers have a little more than two weeks to assess incoming data before deciding whether to act on rates.

A report from the Fed Wednesday said the economy expanded across most regions and industries in July and August as tighter labor markets boosted wages for some workers. Six of 12 Fed districts reported “moderate” growth, and five others said expansion was “modest,” according to the Beige Book.

Jobs Data

Data today on private payrolls showed companies added 190,000 workers in August, below the 200,000 forecast by economists surveyed by Bloomberg. Attention will focus on the government’s monthly jobs report, due Friday, as a major data point before the Fed’s meeting. A separate gauge Wednesday showed July factory orders rose less than forecast by economists.

All of the S&P 500’s 10 main groups increased today, with technology, consumer discretionary and industrial companies each rising more than 2.1 percent after those industries lost at least 2.6 percent on Tuesday. Energy shares rose 0.9 percent after erasing an early 1.2 percent drop. About 7.5 billion shares traded hands on U.S. exchanges, 7 percent above the three-month average.

Along with Apple and Microsoft, a handful of semiconductor companies boosted the tech group. Nvidia Corp., Qorvo Inc. and Avago Technologies Ltd. all rose more than 2.5 percent. Intel Corp. added 2.8 percent as it unveiled a new chip design which will help make laptops more powerful and easier to use, the company said. Facebook Inc. and PayPal Holdings Inc. gained more than 3 percent.

Airlines Rally

Airlines helped lift industrial shares in the benchmark amid the earlier retreat in oil prices. American Airlines Group Inc. and Delta Air Lines Inc. rallied at least 5 percent, with American posting its strongest increase since March. A Bloomberg index of U.S. carriers climbed 4.3 percent, with JetBlue Airways Corp. up 6.4 percent for its biggest gain in four months. The Dow Jones Transportation Average rose 2.5 percent.

Health-care shares advanced as biotechnology companies rebounded from a two-day drubbing. Biogen Inc. and Celgene Corp. added at least 3.5 percent. The Nasdaq Biotechnology Index rose 3.7 percent after after a 5.6 percent drop during the previous two days. Bristol-Myers Squibb Co. increased 2.4 percent while Waters Corp. added 3.3 percent to snap a three-day slide.

Energy companies in the S&P 500 closed higher in a tumultuous day for crude. West Texas Intermediate futures rose 1.9 percent, after falling as much as 4.8 percent following a government report that showed U.S. supplies climbed the most since April. Tesoro Corp. and Newfield Exploration Co. gained more than 3 percent to lead the group. Even with oil’s advance, Chesapeake Energy Corp. and Diamond Offshore Drilling Inc. still lost at least 2.1 percent.