U.S. Stocks Rally as S&P 500 Rebounds From Drop Into Correction

U.S. stocks rallied, with the Standard & Poor’s 500 Index clawing back some of its losses from a global rout that sent the benchmark into a correction amid the steepest two-day drop since the financial crisis.

The S&P 500 rose 1.7 percent to 1,925.62 at 9:32 a.m. in New York, after closing Monday 11 percent below its May all-time high, meeting the definition of a correction for the first time since 2011

Index futures contracts briefly extended gains earlier after China cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside in an attempt to stem the country’s biggest stock market rout since 1996 and a deepening economic slowdown.

After a day of wild swings, the S&P 500 lost 3.9 percent Monday to cap a 7 percent two-day retreat, the most since December 2008. JPMorgan Chase & Co. today recommended buying at these levels.

The slump that wiped $ 2.7 trillion off the value of global equities was triggered by the devaluation of the Chinese yuan on Aug. 11, which spurred a domino drop in emerging-market assets on concern growth in the world’s second-biggest economy is faltering. Commodities, riskier assets and exporters suffered as investors fled to safety, until yesterday, when panic selling gripped what was once the bastion of stability — the U.S. equity market.

Economic reports may further soothe investors, and offer clues on the timing of an interest-rate increase by the Federal Reserve. A consumer confidence index is expected to advance from last month, while July home purchases are also forecast to gain. Economists surveyed by Bloomberg anticipate new home sales will rise 5.8 percent to an annualized pace of 510,000.

Traders are now pricing in a roughly one-in-four chance the central bank will act at its September meeting, from about 48 percent just before the yuan devaluation, as the rout in equity markets has shaken confidence that the global economy will be strong enough to withstand higher U.S. rates.

Fed Bank of Atlanta President Dennis Lockhart said Monday he still expects a rate raise this year, while cautioning that a stronger dollar, a weaker Chinese yuan and falling oil prices complicate the outlook.

Source: Bloomberg


S&P 500 Index Falls Into Correction Amid Global Equities Rout

The Standard & Poor’s 500 Index fell into a correction for the first time since 2011 in one of the most volatile trading days ever, as a rout in global equity markets deepened.

It was a day of wild swings as equities plunged at the open before staging a sharp rebound, with the Nasdaq 100 Index by midday nearly erasing a 9.8 percent drop. The Dow Jones Industrial Average dropped 1,000 points in the opening minutes of trading, and the S&P 500 tumbled 5.3 percent and then pared declines before an afternoon wave of selling.

The S&P 500 dropped 3.9 percent to 1,893.39 at 4 p.m. in New York, and was 11 percent below its May record.

The Chicago Board Options Exchange Volatility Index rose 44 percent to 40.42, trimming an earlier 90 percent surge that temporarily sent the index to its highest level since January 2009. The gauge known as the VIX more than doubled last week, soaring 118 percent to 28.03.

The S&P 500’s rout sent valuations tumbling. The price-to-earnings ratio for the gauge sank to 16.76, the lowest level since the October pullback. Then, the measure bottomed just above 16.50, the cheapest since January 2014.

Source : Bloomberg