MARKET SNAPSHOT: Bipolar Dow Industrials Ends Sharply Higher, Reversing Early Tumble

By Ellie Ismailidou and Sara Sjolin, MarketWatch

ISM services index disappoints; Yahoo, Chipotle tumble on weak earnings

U.S. stocks staged a late-day rally on Wednesday, as a big jump in oil prices lifted the energy and materials sectors, and battered financials reversed ugly losses.

Energy stocks were the best performers on the S&P 500, up 4%, and the energy-focused exchange-traded fund Energy Select Sector SPDR ETF, gained 3.6% while Dow industrials component Exxon Mobil Corp. (XOM) soared 5.2%.

In a session marked by wild swings, the Dow Jones Industrial Average erased a 120-point drop to close 183.19 points, or 1.1%, higher at 16,336.66. The S&P 500 closed up 9.5 points, or 0.5%, at 1,912.53, while the Nasdaq Composite pared earlier losses but remained in negative territory, down 12.71 points, or 0.3%, at 4,504.24.

The market is "in the midst of some midstream adjustments," said James Meyer, chief investment officer at Tower Bridge Advisors. These adjustments result in "volatility without direction. Markets go up 2% one day and down 2% the next. There will be times in this transition period when markets might move 10% or more in one direction," he said.

Stocks had appeared on track to break their recent positive correlation with the gyrations in oil prices , as the main stock indexes tumbled despite an early rebound of more than 3% by oil futures . Weighing on equities was a sharp decline in financials, featuring giants like Morgan Stanley (MS), Citigroup Inc. (C) and Bank of America Corporation (BAC)

But as oil futures extended gains (http://www.marketwatch.com/story/crude-prices-stuck-under-30-as-market-braces-for-stockpile-surge-2016-02-03), rising more than 8%, stocks rebounded, led by oil-and-gas and bank stocks.

A tug of war between the rallying oil prices and a flurry of weaker-than-expected economic data, which was stoking fears of a slowdown in the U.S. economy, resulted in seesawing trade.

A lot of investors are "sitting on the sidelines" even amid rallies in oil prices because the bigger economic picture suggests that "there's not so much reason to step in as a big buyer," said Robert Pavlik, chief market strategist at Boston Private Wealth.

Earlier in the session, the 10-year Treasury yield, the Treasury market's benchmark , tumbled to a one-year low, reflecting the risk-off sentiment and worries over an economic slowdown. Gold , another safe haven, also rallied to its highest settlement level in more than three months (http://www.marketwatch.com/story/gold-rallies-as-drop-in-us-ism-weighs-on-the-dollar-2016-02-03).

Read: Tumbling Treasury yields point to lower rates for longer (http://www.marketwatch.com/story/tumbling-treasury-yields-point-to-lower-rates-for-longer-2016-02-03)

Worries about the banking sector were rooted in concerns about how banks' balance sheets are affected by negative interest rates in the eurozone as well as by widening credit spreads and rising default rates in the U.S., said Mike Antonelli, equity sales trader at R.W Baird & Co. Exchange-traded fund, the SPDR Financial Select Sector (XLF) ended in positive territory after showing steep losses earlier in the day.

Read: Bank stocks rocked by recession fears (http://www.marketwatch.com/story/bank-stocks-rocked-by-recession-fears-2016-02-03)

Data: The U.S. service sector, which includes companies in the retail, banking and health-care sectors, grew in January at the slowest pace in almost two years (http://www.marketwatch.com/story/biggest-part-of-us-economy-not-growing-as-fast-ism-finds-2016-02-03), the Institute for Supply Management said Wednesday.

Separately, a private-sector employment report by payroll-services firm ADP pointed to solid job growth (http://www.marketwatch.com/story/private-sector-hiring-points-to-solid-job-growth-despite-market-turmoil-adp-2016-02-03) in January but weaker than the previous month.

Economists use ADP's private-sector data as a lead-up to the Labor Department's Friday jobs report.

"Bottom line, no job growth in manufacturing and job losses in energy are certainly being offset by other areas of the economy, particularly services. This begs the question over sustainability," said Peter Boockvar, chief market analyst at The Lindsey Group, in emailed comments.

Movers and shakers: Shares of Yahoo! Inc. (YHOO) dropped 4.8% after the Internet services company late Tuesday reported a loss for the fourth quarter (http://www.marketwatch.com/story/yahoo-beats-on-sales-and-axes-workforce-by-15-2016-02-02).

Chipotle Mexican Grill Inc. (CMG) lost 2.9% after the Mexican fast food chain late Tuesday posted its first-ever sales decline (http://www.marketwatch.com/story/chipotle-posts-first-ever-sales-decline-2016-02-02-164855353).

U.S.-listed shares of chemical company Syngenta AG (SYNN.VX) climbed 2.7% after China National Chemical Corp. offered to buy the Swiss firm for $43 billion in cash (http://www.marketwatch.com/story/chemchina-to-buy-syngenta-in-43-billion-deal-2016-02-03).

Merck & Co. Inc. (MRK) inched 0.7% lower after the drugmaker said fourth-quarter sales fell short of estimates (http://www.marketwatch.com/story/merck-tops-profit-estimates-but-sales-fall-slightly-short-2016-02-03).

Comcast Corp. (CMCSA)shares gained 6% after the company reported increased revenue (http://www.marketwatch.com/story/comcast-q4-revenue-grows-as-2015-films-flourish-cable-sub-losses-slow-2016-02-03).

Mondelez International Inc. (MDLZ) lost 6.5% after the company swung to a fourth-quarter loss (http://www.marketwatch.com/story/mondelez-posts-loss-on-venezuela-related-charges-2016-02-03), hurt by a big one-time charge related to its Venezuela business.

General Motors Company (GM) fell 2.5% as the company's strong earnings (http://www.wsj.com/articles/gms-earnings-surge-on-strength-in-china-u-s-1454504606?mod=e2tw)failed to assuage investors' concerns about turbulence in China and concerns U.S. auto sales have peaked.

Other markets: Stocks in Asia closed sharply lower, with Japan's Nikkei down 3.2%. European markets also ended lower (http://www.marketwatch.com/story/european-stocks-tilt-lower-as-focus-turns-to-us-jobs-figures-2016-02-03) for a third session in a row, led by losses for banks. The dollar fell, on track for its largest one-day drop versus the euro in two months.

(END) Dow Jones Newswires

February 03, 2016 17:08 ET (22:08 GMT)

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