U.S. Stocks Surge, Erasing Recent Losses
October 16 2018 - 2:46PM
Dow Jones News
By Akane Otani and David Hodari
U.S. stocks soared Tuesday, sending the Dow Jones Industrial
Average up more than 400 points, as gains in everything from
technology firms to banks helped major indexes claw back recent
losses.
Tuesday's moves marked the latest bout of volatility for stocks,
which have swung throughout October as investors have grappled with
fresh questions about the nine-year bull market's durability.
With bond yields at multiyear highs, many say stocks have begun
to lose some of the luster they held for years in an environment of
ultralow interest rates. Investors are also contending with recent
weakness in technology shares, which some worry look overextended
after dominating the latest leg of the bull market.
Yet even with those worries, many feel the domestic economy
still looks strong -- something that they say has helped the U.S.
stock market keep charging on.
Shares of Goldman Sachs and Morgan Stanley jumped after the two
firms said third-quarter profits surged double-digit percentages,
thanks to a flurry of deal making and trading. Even technology
firms, which had led major indexes lower Monday, got a jolt higher
Tuesday.
"We don't see yields going in the next year to a level that
crushes the economy and therefore crushes the stock market," said
Dave Donabedian, chief investment officer at CIBC Private Wealth
Management.
While investors are likely to contend with more volatility as
interest rates continue to rise, "that will also be counteracted by
periods in which investors embrace what we think will be decent
earnings growth in 2019 and valuations that are reasonable," Mr.
Donabedian added.
The Dow Jones Industrial Average jumped 465 points, or 1.8%, to
25715, while the S&P 500 added 1.8% and the Nasdaq Composite
climbed 2.4%.
Shares of fast-growing companies that tumbled at the start of
the week rallied on Tuesday, helping lead the bounce higher in
major indexes.
Facebook shares rose 2.7%, while Alphabet added 2.5% and
Microsoft climbed 2.8%.
Meanwhile, the latest stream of corporate earnings results drove
swings in the financial sector, sending Goldman Sachs up 2.6% and
Morgan Stanley jumping 5.5%.
Elsewhere, the Stoxx Europe 600 climbed 1.6%, notching its
biggest one-day percentage gain since April.
Italy's populist-led government is sticking to a deficit target
that will bring it into conflict with the European Union, but Prime
Minister Giuseppe Conte on Tuesday declared the country's
membership in the EU as "unrenounceable."
That remark should assuage investors outside Europe worried that
Italy could attempt to pull out of the EU, said Edmund Shing,
global head of equity-derivative strategy at BNP Paribas. "People
are looking around to see whether markets are stabilizing," he
said.
Trading was more mixed in Asia. While Japan's Nikkei Stock
Average closed 1.3% higher -- paring most of its drop Monday --
Chinese stocks took a fresh hit, with the Shanghai Composite down
0.9% and the Shenzhen A Share down 1.9% amid fresh fears about
growth.
The decline in Chinese stocks came on a day of poor economic
data for the country, with auto and Golden Week real-estate sales
sharply lower. Golden Week is a weeklong holiday in early October
that is usually an important time for big-ticket purchases such as
real estate.
Write to Akane Otani at akane.otani@wsj.com and David Hodari at
David.Hodari@dowjones.com
(END) Dow Jones Newswires
October 16, 2018 14:31 ET (18:31 GMT)
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