U.S. stocks bounced higher Monday
following two bruising weeks, lifted by a rally in shares of oil-and-gas
The Dow Jones Industrial Average
jumped 411 points, or 1.6%, to 24602, following its largest one-week percentage
decline in more than two years. The S&P 500 rose 1.4% and the Nasdaq
Composite added 1.5%.
Monday’s gains were broad,
lifting 10 of the S&P 500’s 11 sectors higher for the day. Still, major
stock indexes remain sharply lower for the month, following a heavy bout of
selling that analysts and investors have attributed to failed bets on low stock
market volatility, rising bond yields and concerns about a possible pickup in
Investors have been questioning
whether the declines, which have erased the S&P 500 and Dow industrials’
gains for the year, reflect a short-term technical correction or the
start of a more profound reassessment of the financial climate in light of less
support from central banks.
“I think this is a healthy
squeezing out of some over-optimism,” said James Norman, head of equity
strategy at QS Investors. Still, if inflation rises faster than expected, the
Federal Reserve will need to pick up the pace on interest-rate increases, which
would also lift government bond yields. That could hurt growth and reduce the
appeal of companies that have taken on a lot of debt, he added.
Shares of energy companies rose
with oil prices Monday, giving major indexes a boost.
The S&P 500 energy sector
rose 1.8%, among the biggest gains of the broad index’s 11 sectors, while U.S.
crude oil rose 1.1% to $59.87 a barrel after sliding last week on worries about
rising U.S. production.
Meanwhile, government bonds
weakened, with the yield on the benchmark 10-year U.S. Treasury note—which
rises as bond prices fall—recently at 2.862%, compared with 2.829% Friday.
Rising bond yields had spooked some equity investors last week, raising
concerns about the possibility of central banks increasing interest rates
faster than expected.
“The economy is truly improving
and interest rates are truly heading higher—the average investor did not really
believe that,” said Brian Belski, chief investment strategist at BMO Capital
Markets. “All of a sudden, a dose of reality came in,” he added.
Kokou Agbo-Bloua, global head of
flow strategy and solutions at Société Générale, described the recent pullback
in stocks as primarily an unwinding of crowded trades, exacerbated by a need to
cover short positions on volatility.
“We aren’t seeing panic of any
sort,” he said, although he noted the next few days would be very important to
watch for any kind of negative feedback loop.
Outside the equity market, demand
for haven assets such as gold has been muted, while stocks and bonds in
emerging markets and riskier pockets of Europe have held up well, suggesting
investors remain encouraged about the global economy. Credit spreads have
mostly remained tight, reflecting continued optimism about the outlook for the
“The reaction in [credit]
spreads, for the time being, has been relatively muted because of the good
fundamentals of corporate balance sheets,” said Gilles Pradère, fixed income
portfolio manager at RAM Active Investments.
Earlier, stocks across Europe
rallied, lifting the Stoxx Europe 600 up 1.7%.
The Shenzhen Composite, home to
smaller-cap stocks in China, led gains in Asia, jumping 2.6% after coming under
pressure last week. The Shanghai Composite rose 0.8%, its biggest gain since
Over the weekend, state-run media
reported that the period of volatility for Chinese stocks may be over, said
Ivan Ip, a stocks strategist at UOB Kay Hian. “That was taken as a cue to
invest by local traders,” he added.
South Korea’s Kospi closed up
0.9%, while Hong Kong’s Hang Seng reversed gains late in the session to edge
down 0.2%. Markets in Tokyo were shut for a holiday.
here for the original article from Wall