Markets Rebound from Recent Slump
U.S. stocks rebounded Tuesday after three straight days of deep declines.
The Dow Jones Industrial Average rose 136 points, or 0.8%, to 16458, at the session's high in midday trading. The S&P 500 added 20 points, or 1.1%, to 1894, while the Nasdaq Composite Index rose 58 points, or 1.4%, to 4271.
The Russell 2000 Index of small U.S. companies jumped 2.1% in a sharp bounce after a string of large declines.
Stocks rose even as investors piled into government bonds. Yields on benchmark 10-year Treasury notes fell to 2.227%, from 2.305% late on Friday. Bond yields fall when prices rise. U.S. bond markets were closed on Monday for Columbus Day.
Uncertainty about the pace of global economic growth and changes to the Federal Reserve's easy-money policies have combined to force stocks suddenly and sharply lower in recent weeks. The Dow industrials slumped 223 points on Monday for their ninth decline over the past 11 trading days.
Traders noted that major benchmarks closed near the day's lows in each of the past three sessions, an indication that few buyers were ready to step in with conviction to buy the falling market.
"We're seeing a little of a bounce, though I'd caution that it's early," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management. "The market has tended to show its true hand in the last hour."
"Action we've seen in the [last] couple of weeks hasn't been as much about fundamentals as it has been about sentiment," Mr. Larson said.
The S&P 500 finished Monday down 6.8% since closing at an all-time high on Sept. 18, its steepest pullback since late 2012, when investors wrestled with the implications of the so-called fiscal cliff and political stalemate in Washington, D.C.
"The damage is becoming too hard to ignore," said Mike O'Rourke, chief market strategist at JonesTrading Institutional Services, who has been bearish about the market for most f this year. He said he anticipates that some investors are likely to move chunks of their stock allocation to cash in the months ahead rather than weather more choppy trading.
Most European equity markets reversed course to end higher after Germany's closely watched ZEW survey showed a sharp drop in economic sentiment. The Stoxx Europe 600 ended marginally lower, paring losses of as much as 1.4% earlier. Germany's DAX rose 0.15%. German government bonds surged to their strongest level on record.
J.P. Morgan Chase (NYSE:JPM) swung to a third-quarter profit, but narrowly missed analyst estimates, as legal expenses overshadowed gains in fixed-income trading revenue. J.P. Morgan benefited from stronger investment banking fees, but saw a slump in debt capital markets. Shares declined 0.8%.
Citigroup (NYSE:C) said its quarterly profit rose 6.6% from a year earlier, topping analyst estimates, helped by stronger-than-expected trading revenues. The firm set plans to further retreat from some foreign retail-banking markets. Shares rose 1.4%.
Wells Fargo's (NYSE:WFC) quarterly profit met Wall Street's profit expectations, though results showed a continued slowdown in the bank's mortgage business. Shares declined 1.4%.
Johnson & Johnson (NYSE:JNJ) declined 2% even after the health-care products company said its quarterly earnings rose 59% on higher pharmaceutical sales. The company's report is considered a bellwether since the maker of Band-Aids and Listerine mouthwash is involved in so many business lines.
Oil prices continued to spiral lower. U.S. crude futures declined 2% to $84.01. Increased production in the U.S. has helped contribute to a glut of global oil supply at a time when demand for petroleum products, notably in Europe, is ebbing.