Stocks Rally to End Volatile Session

By Leslie Josephs 

U.S. stocks rose Tuesday as investors bought shares of consumer, technology and health-care companies.

The Dow Jones Industrial Average added 118 points, or 0.7%, at 16516. The S&P 500 gained 0.8%, while the Nasdaq Composite rose 1%.

Major indexes swung between gains and losses several times during the session.

"It feels like to me that the panic selling is starting to abate," said Jeffrey Yu, head of single-stock derivatives trading at UBS AG.

Even with the rebound, the S&P 500 is down 5.2% this year.

The S&P 500's index of technology companies led the index higher with a 1.2% gain, followed by slightly smaller rise in health-care companies.

Still, oil dipped below $30 a barrel, and many energy companies slipped, even after broader indexes recovered.

Williams Cos. fell 12% to $16.54 and Southwestern Energy Co. fell 9.2% to $5.94.

Seven of the 10 biggest laggards in the S&P 500 Tuesday were energy companies, as many investors stayed away from battered energy shares.

"I wouldn't want to be premature in investing my clients' money in anticipation of a turnaround," said Jim Margard, a senior portfolio manager at Rainier Investment Management, which he says has about $3.4 billion in assets under management.

While lower oil prices are traditionally viewed as a boon for consumers and the economy more broadly, recent moves downward have raised the specter of bankruptcies in the energy sector, weighing on broader indexes.

Overnight, before U.S. trading began, Chinese stocks managed to eke out a gain. Sharp declines in Chinese shares have rattled global markets this year.

"China had a considerably less volatile session than we had the last several weeks so that helped calm sentiment a bit, but this decline that started out of China continues to persist," said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management. "China is still slowing, and oil is now flirting with $30."

The Shanghai Composite inched up 0.2% after swinging between gains and losses during the session.

A stronger dollar and failure to stem a global glut of supply have weighed on oil prices in recent months, while mounting concerns about China's slowing growth have magnified fears about demand from the world's second-largest economy.

Traditional haven assets lost a bit of ground Tuesday. Gold fell 1% to $1,085.60 an ounce.

In currencies, the dollar was up 0.3% against the yen at Yen117.9530, while the euro was down 0.2% against the dollar at $1.0837.

The British pound fell 0.8% against the dollar to $1.4434, its lowest level since 2010, as unexpectedly weak U.K. industrial data added to concerns about the manufacturing sector. The Bank of England will hold its first policy meeting of the year this week, and economists forecast no change to benchmark interest rates.

Aluminum maker Alcoa reported a loss after the market closed on Monday . Shares dropped 9% to $7.28.

Corporate profits are expected to take a hit from the stronger dollar, slowing Chinese growth and sliding oil prices.

Investors are eyeing fourth-quarter earnings in hopes that better-than-expected corporate results may help buoy stocks. However, some remain wary of whether earnings will deliver.

"Valuations have been on the higher side...so it leaves us in a bit of a precarious position," said Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management. "If we don't see the earnings growth to support that, we could see again an environment of enhanced volatility," he added.

The S&P 500 recently traded at 17.4 times the past 12 months of earnings, higher than its 10-year average of 15.7, according to FactSet.

The moves in U.S. stocks come at an uncertain time for the Federal Reserve, which is watching economic data closely as it considers the path for raising interest rates. The U.S. economy likely will withstand financial market volatility if it doesn't last too long, allowing more interest-rate increases this year, Federal Reserve Bank of Atlanta President Dennis Lockhart said Monday.

Corrie Driebusch and Saumya Vaishamayan contributed to this article

Write to Leslie Josephs at [e-mail]

(END) Dow Jones Newswires

January 12, 2016 16:24 ET (21:24 GMT)

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