Late-session rally pulls stocks from freefall into positive close

Stocks posted a dramatic late-session turnaround Thursday, lifting all three major indexes from big declines into a positive close.

The Dow Jones Industrial Average posted a 865-point swing in less than two hours. The blue-chip index had been down in mid-afternoon more than 500 points to cut the previous session's gains in half, before bargain hunters and short covering turned a big decline into a modest gain.

The Dow, the S&P 500 and the tech-heavy Nasdaq Composite all posted their largest two-day percentage gains since Aug. 27, 2015.

However, on a month-to-date basis the averages remain down: The Dow is 9.74 percent lower and year-to-date it is down 6.75 percent.

Most of Thursday's session saw stocks in negative territory with the decline in equities broad based -- all 11 major sectors of the S&P 500 were down for much of the day as were all 30 components of the Dow.

Before the late-session turnaround, the S&P 500 was headed for its worst month since February 2009. The Nasdaq was on pace for its worst month since November 2008, and also on pace for its eighth 2-percent-or-more down day in December.

The downdraft stemmed from several causes: Worries about the health of the global economy, concern about possible future interest rate hikes, anxiety over the effects of the U.S.-China trade war; and turmoil in the Trump administration.

Thursday's volatility followed a massive gain on Wednesday when the Dow rose more than 1,080 points, or nearly 5 percent, marking the first time in history the exchange rose more than 1,000 points in a single day of trading. The S&P 500 climbed more than 100 points, or about 5 percent, while the tech-heavy Nasdaq Composite rose more than 360 points, or nearly 6 percent.

Volume was slightly below the month-to-date average.

Crude oil prices extended their losses, with the benchmark West Texas Intermediate tumbling 3.85 percent to $44.44 before trimming the declines. Since Oct. 1 the price of WTI has fallen nearly 40 percent.

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 33507.5 -158.84 -0.47%
SP500 S&P 500 4288.05 -11.65 -0.27%
I:COMP NASDAQ COMPOSITE INDEX 13219.321769 +18.05 +0.14%

European markets returned to trading following the Christmas and Boxing Day holidays to trade lower. London’s FTSE was down 1 percent, Germany’s DAX fell 2 percent and France’s CAC was off 0.4 percent.

In Asia, Japan’s Nikkei followed the Wall Street rally with a gain of  3.9 percent.

Chinese shares marked their lowest close in four years on Thursday, dragged down by Sinopec, the state-owned oil giant whose shares fell after Reuters reported that it had suspended two top executives at its trading arm.

China’s Shanghai Composite index fell 0.6 percent.

Hong Kong’s Hang Seng index fell 0.6 percent.

In economic news, the U.S. Labor Department continues to publish data during the partial government shutdown. The weekly number of people filing for first time jobless claims fell by 1,000 in the past week to 216,000. That came in slighly under the Wall Street estimate for 217,000.

The prior week's claims rose by 3,000 to 217,000.

Gains Wednesday in the tech and retail sectors drove the rally, helping the market recoup losses witnessed on Monday. The energy sector also rose, with U.S. crude oil prices soaring more than nine percent after weeks of declines.

Stocks had taken a beating recently on lingering worries about the economy and caution over persisting political uncertainties, as a partial federal government shutdown lingers and President Trump's continues his hostile stance toward the Federal Reserve.

FOX Business' Ken Martin contributed to this story.