‘Sentiment can be fickle in times like these, so it’s important to not get whipsawed…’
The Dow Jones Industrial Average finished up nearly 1,100 points, or about five percent, at 22,878.45.
The broad-based S&P 500 also surged five percent to 2,467.70, while the tech-rich Nasdaq Composite Index advanced 5.8 percent to 6,554.36.
The gains were the biggest for a single session on Wall Street in nine years, a surge analysts attributed in part to technical factors after days of selling.
“It’s coming off of oversold conditions and it was frankly due for a bounce,” said Matt Miskin, market strategist at John Hancock Investments.
“Sentiment can be fickle in times like these, so it’s important to not get whipsawed.”
The bounce offered some validation for President Donald Trump after economic prognosticators have worked overtime trying to link an economic slowdown to his every move—be it the government shutdown, the withdrawal of troops or criticisms of the Federal Reserve for its interest rate hikes.
It came two days after Rep. Nancy Pelosi, D-Calif., and Sen. Charles Schumer, D-N.Y., basked in people’s economic anxieties in a special Christmas Eve tweet.
It’s Christmas Eve and @realDonaldTrump is plunging the country into chaos. The stock market is tanking and the president is waging a personal war on the Federal Reserve — after he just fired the Secretary of Defense. #TrumpShutdown
— Nancy Pelosi (@NancyPelosi) December 24, 2018
Last week, CNN anchor Don Lemon craftily attempted to declare that the booming economy belonged to Obama but that its inevitable slowdown would be the Trump economy.
Still, the session was not without its shaky moments. After opening solidly higher, the Dow briefly sank into the red in mid-morning before recovering and gathering steam throughout the day.
More Weakness Ahead?
Some were slow to concede their error, insisting that the bounce-back was a natural adjustment but that the economy was still faltering because of Trump.
The sense of bearishness among investors is “just huge,” said Karl Haeling of LBBW.
“From a tactical standpoint, you can expect a reflex rally,” said Canaccord Genuity equity strategist Tony Dwyer in a note released ahead of Wednesday’s session. “But it is hard to find an extreme oversold low that is not retested.”
Yet some analysts have argued that the stock market’s weakness in December has been disproportionate to economic conditions at a time when unemployment is low and growth is still solid.
“Our judgment is that the U.S. economy remains solid at the moment,” though investors need to pay attention to the possible impact of trade rows with other countries on financial markets and business outlooks, said a report by Norio Miyagawa, senior economist at Mizuho Securities.
“As financial markets regain their calm, we expect U.S. stocks and the dollar will track higher,” he said.
Data from Mastercard SpendingPulse showed holiday sales increased 5.1 percent this holiday season to more than $850 billion, the biggest growth in the last six years.
White House economic advisor Kevin Hassett sought to reassure on Powell’s prospects, telling ABC News the Fed chief is “100 percent” safe. The remarks followed weekend media reports that US President Donald Trump has discussed firing Powell.
Analysts also took heart from a nearly nine percent jump in US oil prices, the biggest in more than two years and another bounce back following recent weakness in petroleum markets.
Retailers were especially strong, with Amazon soaring 9.5 percent after declaring that its notched new records in holiday sales, fueled by “tens of millions” of new subscriptions or free trials of its Prime service.
Petroleum-linked shares also had a good session, with Chevron winning 6.3 percent and Halliburton 5.1 percent following the rally in oil prices.