Stock rebound gains speed: Dow rallies 300+

August 27 23:42 2015

Stocks surged again Thursday as Wall Street builds on the Dow’s historic rally Wednesday as order is restored to the U.S. stock market following its first dip into correction territory in four years. The Dow Jones industrial average jumped about 375 points, or 2.1% in afternoon trading and the Standard & Poor’s 500-stock index gained 2.5%. The Nasdaq composite index jumped 2.6%. Oil prices surged 9% and jumped way back above the $40 level as benchmark U.S. crude was up $3.48 to $42.09 a barrel.1215-stock-market_full_600

Investor angst is on the decline and stock prices are again on the rise following the Dow’s nearly 620-point, 4% gain Wednesday — a much-needed rebound that restored a sense of stability to a nervous market following a nearly 15% drop for the blue-chip stock gauge from its May 19 high. Powering the rally were fresh signs that the U.S. economy is still powering on despite slowing growth in China — including a super-strong revised reading released today on second-quarter GDP, which came in at 3.7%, up from an initial estimate of 2.3% — and comments from a Federal Reserve member Wednesday that pointed out that the reasons for a September interest-rate hike were “less compelling” following the recent market turbulence caused by China’s growth scare.

Also driving the bullish price action today on Wall Street was “news that the Chinese government was directly buying equities in addition to making liquidity injections into the banking system,” according to a report from Bespoke Investment Group. The government support helped the Shanghai composite index reverse losses late in the day and finish up more than 5%. Today’s follow-through rally is what Wall Street was hoping for, as investors want to see clear signs that appetite for risk-taking is back and build on Wednesday’s historic gains. Wall Street traders also got confirmation that Wednesday’s rally had legs when stock markets in China, Japan and then Europe all rallied earlier today.

The positive price action on Wall Street is critical, given the recent turbulence, says Paul Hickey, co-founder of Bespoke Investment Group. Shares in Shanghai staged a late-day rally that pushed the mainland Chinese stock index, which had fallen 25% since August 11, according to Barclays, to a 5.3% gain. Shares were also up in Japan, with the Nikkei 225 up 1.1%. Stocks in Hong Kong also rose sharply, rallying 3.6%. The rally in Asia then spread to Europe, where battered stock indexes in Germany, France and London all up more than 3%.