By Wallace Witkowski and Anora Mahmudova, MarketWatch
Shanghai index gains for first time in six sessions; oil
jumps
U.S. stocks rallied to close near their intraday highs for a
second straight session Thursday, as China showed signs that
measures to stabilize its economy and stock market may be taking
hold.
In afternoon trade, stocks made a dramatic turn lower but
stormed back in the final hour of trading, repeating a pattern of
roller-coaster activity that has come to be a trademark of the past
several sessions.
The Dow Jones Industrial Average rose 369.26 points, or 2.3%, to
close at 16,654.77, with all 30 members of the blue-chip index
trading higher. Earlier, the Dow was up by as many as 381
points.
Read: The Dow Jones Industrial Average just made history
(http://www.marketwatch.com/story/the-dow-jones-industrial-average-did-something-its-never-done-before-2015-08-27)
The S&P 500 finished up 47.15 points, or 2.4% to 1,987.66,
after posting a 49-point gain. All 10 of the index's main sectors
traded higher. The Nasdaq Composite climbed 115.17 points, or 2.5%
at 4,812.71, after being up by as many as 121 points.
As a result, for the week, the Dow is up 1.2%, the S&P is
0.9% higher, and the Nasdaq is up 2.3%.
The implied volatility on the S&P 500--the so-called "fear
index"--as measured by the CBOE Volatility Index fell 14% to
26.10.
A larger-than-expected upward revision to 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
[the] 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 2016," 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 by the end of 2016, according to Orlando.
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.
See: U.S. investors shouldn't fear China's slowdown
(http://www.marketwatch.com/story/us-investors-shouldnt-fear-chinas-slowdown-2015-08-27).
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 due to a lack of
confidence in 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, Canally 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)
settled 10% higher, while gold
(http://www.marketwatch.com/story/gold-tilts-lower-eyes-4-day-losing-streak-2015-08-27)
settled slightly lower. The dollar
(http://www.marketwatch.com/story/dollar-steady-against-yen-as-risk-sentiment-improves-2015-08-27-11033527)
strengthened by 0.7%.
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
(http://www.marketwatch.com/story/central-bankers-at-jackson-hole-search-for-answers-on-low-inflation-2015-08-27).,
where the central bank might offer fresh clues 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.
Individual movers and shakers: Prominent investor Carl Icahn
revealed a roughly 6.8% stake
(http://www.marketwatch.com/story/carl-icahn-discloses-stake-in-freeport-mcmoran-may-seek-board-seat-2015-08-27)
in Freeport-McMoRan, Inc. (FCX) late Thursday after the company
earlier in the day cut its capital spending plans for 2016 by 29%
and said it would also eliminate some jobs. Shares jumped nearly
29% to lead the S&P 500 gainers and also popped higher after in
after-hours trade when the stake was announced.
Tesla Motors Inc. (TSLA) shares rallied 8% after Consumer
Reports gave the electric car maker's Model S sedan a 103-point
score out of 100.
Tiffany & Co.(TIF) slumped 2% after its disappointing
quarterly earnings report. Dollar General Corp.(DG) slid 3%
following its quarterly results.
.--Victor Reklaitis in London contributed to this article.
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(END) Dow Jones Newswires
August 27, 2015 17:06 ET (21:06 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.