By Wallace Witkowski and Anora Mahmudova, MarketWatch
Shanghai index gains for first time in six sessions; oil
jumps
U.S. stocks surged Thursday, building on the previous session's
sharp rebound and erasing weekly losses as China showed signs that
measures to stabilize its economy and stock market may be taking
hold.
A larger-than-expected upward revision to the U.S. gross
domestic product data, showing that U.S. economy grew at a faster
3.7% in the second quarter
(http://www.marketwatch.com/story/us-economy-looks-much-stronger-after-upward-revision-to-gdp-report-2015-08-27),
helped lift the spirits of investors that have been unsettled by a
spate of volatility. Weekly data on jobless claims
(http://www.marketwatch.com/story/us-jobless-claims-fall-6000-to-271000-2015-08-27-8913022),
which pointed to continued strength in the labor market, added to
the optimism.
"Today's revision means the U.S. economy is growing faster and
consumer spending portion points to a stronger growth in the second
half of the year. With this kind of growth, we expect $135 earnings
per share by the end of 2015," said Phil Orlando, chief equity
strategist and senior portfolio manager at Federated Investors.
That translates to a 35% rise in the S&P 500 from its
current level, according to Orlando.
Stocks were busy carving out new intraday highs as the session
progressed into the afternoon.
The Dow Jones Industrial Average climbed 345 points, or 2.1%, to
16,631, with all 30 members of the blue-chip index trading higher.
The S&P 500 rose 45 points, or 2.3% to 1,986, with all 10 of
the index's main sectors trading higher. The Nasdaq Composite
surged 111 points, or 2.4% at 4,809.
For the week, The Dow is up 1%, the S&P is 0.7% higher, and
the Nasdaq is up 2.2%.
The implied volatility on the S&P 500--the so-called fear
gauge--as measured by the CBOE Volatility Index fell 17% to
25.26.
Global equity markets rallied following a 5.3% surge in the
Shanghai Composite overnight, snapping a losing streak that wiped
out nearly a quarter of its value in a week. That jump cheered
investors world-wide, as fears about China have been blamed for
much of the recent intense selling around the globe.
Even so, some China watchers are questioning what drove the move
and suggest the Chinese government intervened again. Read more:
China's mystery rally
(http://www.marketwatch.com/story/beijing-loch-ness-monster-eyed-in-mystery-of-china-rally-2015-08-27)
Investors had fled from stocks largely from a lack in confidence
of the Chinese government's handling of its financial markets, and
the perception that the government was spending all its political
capital on propping up the stock market rather than investing in
its domestic economy, said John Canally, chief economic strategist
for LPL Financial.
"They're clumsy and not used to reacting to markets," Canally
said. "They're new to this."
The rally in U.S. stocks implies that investors are treating the
recent actions out of China much like they did the 1998 Asian
markets crisis, when U.S. stocks sold off initially, then bounced
back, he said.
On Wednesday, the S&P 500 jumped 3.9% as the Dow surged 619
points
(http://www.marketwatch.com/story/us-stocks-on-track-to-rise-as-china-tries-fresh-stimulus-2015-08-26).
The benchmark S&P stands 8.9% off its May record close, after
finishing down 12.4% from that level on Tuesday.
Other markets:Asian markets rebounded
(http://www.marketwatch.com/story/asian-markets-rebound-boosted-by-central-banks-us-data-2015-08-27),
while European stocks also traded higher
(http://www.marketwatch.com/story/european-stocks-bounce-up-tracking-rallies-in-asia-us-2015-08-27).
Crude oil
(http://www.marketwatch.com/story/oil-rebounds-by-over-2-as-stocks-recover-2015-08-27)
climbed 9%, while gold was slightly lower. The dollar
(http://www.marketwatch.com/story/dollar-steady-against-yen-as-risk-sentiment-improves-2015-08-27-11033527)
strengthened by nearly 1%.
Economic news:The U.S. economy grew at a faster 3.7% annual pace
(http://www.marketwatch.com/story/us-economy-looks-much-stronger-after-upward-revision-to-gdp-report-2015-08-27)in
the second quarter, up from the initial estimate of growth at a
2.3% clip, the Commerce Department said Thursday.
New applications for U.S. unemployment benefits fell by 6,000 to
271,000 in the seven days ended August 22, the first decline after
four straight weekly gains.
Pending home sales rose 0.5% in July after an upward revision to
June's numbers, the National Association of Realtors said
Thursday.
The weekend will bring the Federal Reserve's annual conference
in Jackson Hole, Wyo., where the central bank might offer fresh
clues
(http://www.marketwatch.com/story/fischers-jackson-hole-speech-could-be-the-signal-whether-hike-will-come-2015-08-20)
about a possible interest-rate hike. On the Fed front on Thursday,
Kansas City Fed President Esther George said the market turmoil
"complicates" any decision to raise rates, but she repeated her
long-held call for a rate increase
(http://www.marketwatch.com/story/kc-feds-george-repeats-call-for-rate-hikes-but-says-market-turmoil-complicates-decision-2015-08-27).
Individual movers and shakers:Freeport-McMoRan, Inc.(FCX) cut
its capital spending plans for 2016 by 29% and said it would also
cut jobs. Shares jumped 29% to lead the S&P 500 gainers.
Tesla Motors Inc.(TSLA) shares jumped 8% after Consumer Reports
gave the electric car maker's Model S sedan a 103-point score out
of 100
(http://www.marketwatch.com/story/tesla-model-s-scores-another-best-in-class-from-consumer-reports-2015-08-27).
Shares in St. Jude Medical(STJ) initially surged on news that
Abbott Laboratories(ABT) might buy out
(http://www.marketwatch.com/story/st-jude-medical-shares-surge-13-on-report-abbott-labs-prepping-25-bln-bid-2015-08-27)
the maker of medical devices, but then gave up much of its gain,
trading 4.8% higher.
Tiffany & Co.(TIF) slumped 1.6% after its disappointing
quarterly earnings report
(http://www.marketwatch.com/story/tiffanys-stock-drops-after-profit-and-sales-miss-outlook-disappoints-2015-08-27).
Dollar General Corp.(DG) slid 3.8% following its quarterly results
(http://www.marketwatch.com/story/dollar-general-profit-tops-estimates-but-sales-lag-2015-08-27).
--Victor Reklaitis in London contributed to this report.
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(END) Dow Jones Newswires
August 27, 2015 13:09 ET (17:09 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.