U.S. stocks moved sharply higher Monday afternoon, bouncing from the longest stretch of weekly losses for the Dow Jones Industrial Average since 1932 and a temporary dip by the S&P 500 into bear-market territory last week.
Monday’s gains were credited in part by some analysts to comments made by President Joe Biden about a reconsideration of China tariffs.
How are stocks trading?
- The Dow Jones Industrial Average DJIA, +2.09% jumped 645 points, or 2.1%, to 31,907.
- The S&P 500 SPX, +1.79% advanced 65 points, or 1.7%, to 3,965.
- The Nasdaq Composite COMP, +1.46% was up 146 points, or 1.3%, at 11,501.
On Friday, the Dow Jones Industrial Average saw its eighth straight weekly decline, marking its longest losing streak since April 1932, according to Dow Jones Market Data. The S&P 500 and Nasdaq Composite each suffered seven straight weekly losses, their longest losing stretches since March 2001.
What’s driving the markets?
Investors appeared ready to buy a market beaten down by weeks of selling. That was despite reports of surging COVID cases in Beijing, where officials extended an order for students and workers to stay home and will carry out more mass testing in the nation’s second-largest city.
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Analysts attributed equity index futures gains to comments by President Joe Biden, who said China tariffs imposed during the Trump administration were under consideration and would be discussed with Treasury Secretary Janet Yellen upon his return to the U.S. from Asia.
Biden also said the U.S. would defend Taiwan from aggression by China, though White House officials later said there had been no change to U.S. policy. Washington has long pursued a policy of strategic ambiguity around Taiwan.
Read: In Tokyo, Biden set to launch new Indo-Pacific trade pact to replace TPP
“U.S. noises in Asia, particularly comments about the tariffs, maybe kindled some fleeting optimism in the market but it’s going to take more than this to reset the bear market, albeit the S&P 500 is now trading below its 10-year average PE [price earnings] for the first time since March 2020 and cash levels are extremely high,” said Neil Wilson, chief market analyst for Markets.com, in a note to clients.
On Friday, the S&P 500 traded below 3,837.25, the level that marks a 20% pullback from its Jan. 3 record close, but managed to eke out a gain. A finish below that level would have confirmed a bear market for the large-cap benchmark.
Significant skepticism remains toward the idea stocks have put in a lasting bottom. Researchers at New York-based BlackRock, the world’s largest asset manager, turned neutral on developed-market stocks like those of the U.S. and said they see no catalyst for a sustained rebound in assets perceived as risky right now.
At Jefferies, Sean Darby, global equity strategy, and others wrote in a note on Monday that their analysis suggests “that, despite investor sentiment surveys being quite bearish, there has not been the cathartic selling that would accompany a market bottom.”
“If we are correct, then the final part of the earnings momentum cycle is a combination of both earnings cuts and a slice in target prices. Investors should be conservatively positioned,” the team at Jefferies wrote.
Appetite for risk weighed on the dollar. The ICE Dollar Index DXY, -0.87%, which measures the greenback against a basket of major currencies, dropped 0.9%. Oil prices CL00, -0.04% flipped between gains and losses. Gold prices GC00, +0.36% rose 0.4% as the dollar pulled back.
There is no U.S. economic data on the calendar for Monday, but investors will keep an eye on the World Economic Forum in Davos, Switzerland, which is back after a two-year absence.
Also read: Davos’ post-COVID return laden with climate, economic woes and a war in Europe
What companies are in focus?
- Shares of VMware Inc. VMW, +20.41% jumped 21% after reports chip maker Broadcom Inc. AVGO, -3.14% was in talks to buy the enterprise cloud-computing company. Broadcom shares fell 2.7%.
How are other assets trading?
- The yield on the 10-year TMUBMUSD10Y, 2.859% note was up 7 basis points at 2.86%.
- Bitcoin BTCUSD, +1.57% edged up 1.6% to $30,392.
- In European equities, the Stoxx Europe 600 SXXP, +1.26% finished up by 1.3%, while the FTSE 100 UKX, +1.67% gained 1.7%.
- In Asia, the Shanghai Composite SHCOMP, +0.01% finished flat, while Hong Kong’s Hang Seng Index HSI, -1.19% fell 1.2%. Japan’s Nikkei 225 index NIK, +0.98% rose 1%.
—- Barbara Kollmeyer contributed to this article.
