U.S. stocks rebounded in afternoon trading Wednesday after slumping for six straight days on concern that growth in China was slowing more quickly than previously thought.
Chinese stocks fell for a fourth day, hitting an eight-month low amid signs Beijing was no longer buying shares to stem a price slide, and Japanese stocks also dropped. The Dow lost about 1,900 points over that period, and more than $2 trillion in corporate value was wiped out. The Standard & Poor’s 500 index jumped 59 points, or 3.2 percent, to 1,926.
The Nasdaq composite shed 179.79 points, or 3.8 percent, closing at 4,526.25.
Dennis Ulikowski works in a both on the floor of the New York Stock Exchange, Wednesday, August 26, 2015.
Mellahi says that while the rate cuts may buoy markets in the short-term, the underlying causes of investors’ concerns – the slowdown in the Chinese economy – will last for some time.
The Dow had surged more than 400 points Tuesday after China cut its interest rates for the fifth time in nine months in a renewed effort to shore up growth.
“The stock market might fall further in the near future because investors are in a panic”, said market analyst Zhang Yang at Sinolink Securities in Shanghai. The Fed isn’t expected to deliver a policy update until it wraps up a meeting of policymakers in mid-September.
Zandi said the catalysts for the stock market tumble of the last couple days are the economic slowdown in the world’s second-biggest economy, China, and increasing prospects for the Federal Reserve to soon begin raising interest rates.
THE QUOTE: “There’s a lot of cash on the sidelines waiting to get in, so to the extent that there’s any sort of bottom seen, that will increase people’s confidence and boldness”, said Erik Davidson, chief investment officer for Wells Fargo Private Bank.
Heightened concern about a slowdown in China had already shaken markets around the world on Friday, driving the U.S. stock market sharply lower.
US shares of Swiss pesticides giant Syngenta slumped 13.6 per cent after Monsanto dropped its campaign to buy the company following rejections. The stock gained $7.70 to $97.05.
EUROPEAN ACTION: Germany’s DAX was down 1.3 percent, while France’s CAC 40 fell 1.4 percent.
The Dow Jones industrial average fell 204.78, or 1.3 percent, to 15,666.44 The Standard & Poor’s 500 index dropped 25.60 points, or 1.4 percent, to 1,867.62.
The Commerce Department said new house sales rose 5.4% in July, slightly less than expected but still indicative of recovery in the housing market.
Tokyo’s Nikkei 225 also closed lower, sliding 4 percent after sliding 4.6 percent Monday. Hong Kong’s Hang Seng index rose or 0.7 percent, while Sydney’s S&P ASX 200 gained 2.7 percent and Seoul’s Kospi index and Singapore’s Straits Times index also rose.
ENERGY: Benchmark U.S. crude fell 21 cents to $39.10 a barrel in New York.
Treasury bonds fell, pushing up the yield on the benchmark 10-year note to 2.16 percent.
In currency markets, the dollar declined to 119.4810 yen from Monday’s 118.6930 yen. The Russian ruble dropped 2.3 percent to a seven-year low. Some 2,000 stocks out of about 2,800 on China’s two mainland exchanges fell by the 10 per cent daily limit, according to Hexun, a financial news website.