Stocks rebound sharply
Finally, a bounce.
U.S. stock prices Tuesday staged their biggest rebound since the global sell-off that began a week ago.
The Dow Jones industrials jumped 157.18 points, or 1.3%, to 12,207.59, and broader market indexes also rose sharply.
Today will show whether it was a one-day wonder or something longer-lasting.
Many analysts warned investors not to get their hopes up in the short term.
“It doesn’t feel like a euphoric-type rally, where it’s, ‘Everybody back in the market!’ ” said Jay Suskind, director of trading at brokerage Ryan Beck & Co. in Florham Park, N.J., about Tuesday’s gains. “I don’t think it’s anything to draw a huge conclusion about.”
Many analysts said the jump in share prices was caused largely by technical factors -- such as large investors closing out “short” sales, which are bets that stocks would fall.
After a week of largely uninterrupted selling, traders had expected a so-called reflex rally led by bargain hunters and short-term players looking for a quick profit.
“It’s a nice bounce-back from an oversold position,” said Todd Leone, a trader at Cowen & Co. in New York.
A back-and-forth pattern after steep declines is “very typical of how we find a bottom,” said Art Hogan, chief market strategist at Jefferies & Co. “We work our way through the process.”
Stocks shot up at the outset and moved steadily higher for much of the session.
Some analysts said the breadth of the advance was encouraging: Winners outnumbered losers by nearly 5 to 1 on the New York Stock Exchange.
The Standard & Poor’s 500 index gained 21.29 points, or 1.6%, to 1,395.41.
The Nasdaq composite surged 44.46 points, or 1.9%, to 2,385.14.
Financial and real estate-related stocks were among the day’s biggest winners. They had been trounced over the last week.
Markets worldwide plunged last week in a sell-off that began in China and quickly spread. In the U.S., investors’ worries appeared to center on the economy, and whether hopes for a “soft landing” were giving way to rising risk of a recession.
One economic report Tuesday wasn’t cheerful: The government said factory orders in January suffered their biggest drop in more than six years.
But that failed to stem the market’s momentum.
Strength in Asian markets helped Wall Street’s mood. Japan’s Nikkei-225 index gained 1.2% on Tuesday as the yen weakened somewhat against the dollar. Hong Kong’s market was up 2.1%, and the Shanghai composite index rose 2%.
In Europe, markets were modestly higher. German stocks rose 0.9%.
Although the U.S. market’s recent losses were significant, they didn’t amount even to a typical “correction” in a bull market.
Through Monday, the Dow was down 5.8% from its record high reached Feb. 20. A correction would be expected to slice 10% to 15% off the index’s value.
The Nasdaq composite through Monday was down 7.3% from its six-year high reached Feb. 22.
The last significant market setback lasted about four weeks, from mid-May to mid-June last year.
It was interrupted by several short-term rallies before sellers took control again.
The Dow dropped 8% in that pullback before it bottomed. The Nasdaq index lost nearly 15%.
Among Tuesday’s market highlights:
* Battered shares of some mortgage lenders recouped some of their losses. Countrywide Financial rose $1.65 to $36.85, Fremont General rallied 89 cents to $6.78 and New Century Financial gained 46 cents to $5.02. But New Century traded as high as $6.08 before falling back by the closing bell.
* Real estate investment trusts surged. A Bloomberg News index of 134 REIT shares jumped 3.5% after losing 12.6% from its record high in February through Monday.
* Small-company stocks posted sharp gains, after heavy recent losses. The Russell 2,000 index rose 2.5%, its biggest one-day advance since July.
* Brokerage stocks reversed some of their recent declines. Merrill Lynch rose $2.13 to $82.10, and Bear Stearns was up $4.50 to $149.
* Prices of many commodities rebounded with stocks. Near-term crude oil futures added 62 cents to $60.69 a barrel in New York. Gold futures were up $7.10 to $643.80 an ounce.
* IBM led a rally in tech shares, rising $1.99 to $93.80 and helping to boost the Dow.
* Some investors pulled out of Treasury bonds, which had benefited as stocks fell last week. The yield on the 10-year T-note rose to 4.53% from 4.50% on Monday. Yields rise as bond prices fall.
*
walter.hamilton@latimes.com
Petruno reported from Los Angeles. Hamilton reported from New York.
