Dow soars 323 points, erases 2015 losses
Wall Street's early-year stumble is over and the U.S. stock market is back in the black for the year.
In a stunning turnaround after the worst three-day start to a year since 2008, the stock market bounce that began Wednesday gathered more momentum Thursday when the Dow Jones industrial average surged more than 300 points, wiping out its early-year losses and climbing back into positive territory for the year.
The Dow, Standard & Poor's 500 and Nasdaq composite each finished up 1.8% Thursday. The Dow's 323-point advance, which follows a 213-point jump Wednesday, marks its first back-to-back triple-digit point gains since Dec. 17-18.
The blue-chip index, which was down 2.5% just three sessions into the year, is now up 0.5% in 2015. The Dow has rallied 536 points the past two sessions, erasing the 461-point two-day dip to start the week. The powerful rally has also put the S&P 500 and Nasdaq back into the plus column for the year. The S&P 500 gained 36 points to 2062.14, while the Nasdaq gained nearly 86 points to close at 4736.19.
"Buy the dip is definitely not dead," says Frank Fantozzi , president and CEO of Planned Financial Services, a Cleveland-based financial planning and investment firm.
The same forces that sparked the market bounce Wednesday -- stabilization in oil prices and rising hopes for more aggressive stimulus from central bankers in the Eurozone -- drove prices higher again Thursday.
Stocks also got a lift from comments from a Federal Reserve member last night that suggested it would be a mistake for the Fed to raise interest rates this year. That raised hopes that the Fed might push back their rate-hike timetable. Low rates have been a key pillar of the nearly six-year-old bull market in stocks.
A strong rally in European stock markets, which picked up steam late in the trading session, also boosted investor sentiment. Global investors are betting that the European Central Bank will embark on a U.S.-style government bond-buying program later this month to combat dangerously low inflation and stimulate growth. Germany's DAX index closed up 3.4%, while the CAC 40 in Paris, despite yesterday's deadly terror attack, rose 3.6%. The FTSE 100 in London gained 2.3%.
Investors with money on the sidelines that still believe the U.S. economy will continue to gain steam this year used the Dow's nearly 4% drop from its Dec. 26 all-time high as an opportunity to pick up some bargains, adds Fantozzi.
"There's a lot of cash on the sidelines and investors said, 'OK, the market dropped. Let me take advantage,'" Fantozzi says. "I think when you see the market cool from time to time, you will see people use that as a reason to buy in. It is like going to Macy's and buying something for 10% to 15% off."
A continuation of good economic data at home this morning also gave Wall Street reason to breathe more easily. The number of Americans filing initial jobless claims fell 4,000 last week to 294,000. That positive news follows Wednesday's better-than-expected readings on private job creation lat month and a sizable drop in the nation's deficit November.
The upbeat data suggests that the U.S. economy -- at least so far -- is shrugging off weak growth abroad and continues its momentum.
Another positive for the bulls is continued stabilization in the oil patch. After falling more than 50% from its highs back in June, U.S. crude prices have stopped going down and have been inching back up.
In trading today that trend is continuing. U.S. oil prices are trading up 29 cents to $48.94 per barrel.
Stocks have basically been tracking the price of oil. When oil slumps, so do stocks. But when oil sports a gain, like it did Wednesday, stocks also accelerate to the upside.
"The market is trading on oil," says Michael Farr, president of money management firm Farr Miller & Washington. "If oil stabilizes … the market will stabilize."
Also in focus will be an early afternoon speech from Boston Fed President Eric Rosengren, says Karee Venema, an analyst at Schaeffer's Investment Research. "This comes in the wake of last night's dovish comments from Chicago Fed President Charles Evans, who said he doesn't expect the economy to hit the Federal Reserve's target inflation rate until 2018, and cautioned against raising interest rates until next year."
Investors, of course, have been bracing for the first Fed rate hike since 2006 sometime this year, with most Wall Street pros expecting the first increase to come mid-year. Low rates have been a key pillar of the stock bull market since it began in March 2009.
In Asia, Japan's Nikkei 225 index closed up 1.7% and Hong Kong's Hang Seng index rose 0.7%. The Shanghai composite fell 2.4% after running up to its highest level since 2009 in previous sessions. Bespoke Investment Group, in a report to clients, said the stock selloff in China came "after the government banned individual investors from buying corporate bonds issued by small and medium-sized businesses, raising fears over liquidity and default risk."