U.S. Stocks Rebound After Sharp Selloff

By Saumya Vaishampayan 

U.S. stocks remained higher Wednesday after the release of the Federal Reserve's latest meeting minutes, with the S&P 500 on track to snap a five-session losing streak.

Investors attributed the move to an upbeat U.S. labor-market report and gains in European stocks. They also eyed crude-oil prices, which rose Wednesday but have slumped 54% since June, raising concerns about slowing global growth.

The Dow Jones Industrial Average advanced 214 points, or 1.2%, to 17585, trading near session highs. The S&P 500 rose 24 points, or 1.2%, to 2027 and the Nasdaq Composite Index gained 57 points, or 1.2%, to 4649.

The Fed minutes revealed that officials saw global economic turbulence as a significant risk to the U.S. economy when they met in December. Still, officials looked past those concerns because they expect foreign central bankers to respond with fresh stimulus measures. Fed officials have signaled that U.S. interest rates are likely to rise in 2015.

Wednesday's gains come after five sessions of losses for the S&P 500, its longest losing streak since December 2013. The Dow has declined 2.6% since its Dec. 26 record close of 18053.71, while the S&P 500 has fallen 3% from its Dec. 29 record close of 2090.57.

"We'd come too far too fast," said Steven Rosen, head of single stock and ETF volatility trading at Société Générale, referring to recent stock-market declines. Wednesday's rebound is "not that surprising, especially when you've had this prolonged market of buying the dips," he added.

Pullbacks in recent months have been short-lived, as many investors believe that economic improvement and growing corporate profits should continue to propel stocks higher. Fourth-quarter earnings season unofficially begins on Jan. 12, when Alcoa Inc. reports results. Overall, companies in the S&P 500 are expected to report a 2.3% increase in fourth-quarter earnings, according to FactSet.

"We were due for a bounce," said Quincy Krosby, market strategist at Prudential Financial, adding that the market had been oversold.

Boosting sentiment Wednesday, data showed that U.S. private payrolls increased 241,000 in December. Economists surveyed by The Wall Street Journal expected a gain of 250,000.

Improvement in the labor market is a "very strong tailwind for the market to continue higher in 2015, excluding the global macroeconomic situation," said Jeffrey Yu, head of single-stock derivatives trading at UBS AG. He said that much of the recent selling in U.S. stocks had been sparked by global concerns and the slide in oil prices.

In the eurozone, consumer prices fell on an annual basis in December for the first time in more than five years, down 0.2% from a year ago, according to the European Union's statistics agency. The data increased pressure on the European Central Bank to bolster its stimulus program.

The unveiling of additional stimulus from the ECB would result in a "pretty massive rally in global stocks," said Brian Needleman, chief investment officer at Cornerstone Financial Partners, a wealth management firm with $1.05 billion under management. He said his biggest investment was in European stocks, particularly in the financial, industrial and technology sectors.

The euro fell to a nine-year low against the dollar, recently trading at $1.1823. European stocks gained. Germany's DAX gained 0.5% and the Stoxx Europe 600 also rose 0.5%.

Write to Saumya Vaishampayan at [e-mail]

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