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Stocks Erase Advance as S&P 500 Index Rebound Falters

Image: Stocks Erase Advance as S&P 500 Index Rebound Falters

Tuesday, 25 Aug 2015 04:14 PM

U.S. stocks erased gains after a rebound from the Standard & Poor’s 500 Index’s first correction since 2011 lost momentum.

The S&P 500 fell 0.6 percent to 1,881.87 at 3:46 p.m. in New York, after an earlier 2.9 percent increase. The index closed Monday in a correction for the first time in four years.

“There’s still some technical damage that needs to be corrected, and there’s still some selling that needs to take place, which is probably why we’re off intraday highs,” said Terry Morris, a senior equity manager who helps oversee about $2.8 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co. “We’re not just going to slingshot back up.”

China earlier today cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside in an attempt to stem the country’s biggest stock market rout since 1996 and a deepening economic slowdown.

More Swings

After a day of wild swings, the S&P 500 lost 3.9 percent Monday. That capped a 7 percent two-day retreat, the most since December 2008, sending the index into its first correction since 2011. JPMorgan Chase & Co. today recommended buying at these levels. The Chicago Board Options Exchange Volatility Index slid 15 percent Tuesday to 34.85. The gauge, know as the VIX, surged as much as 90 percent Monday to touch the highest level since January 2009 before closing at a nearly four-year high.

“I’m not surprised to see the market move up, given the magnitude of the selloff we’ve seen the past four days and the moves made by China after the market close in terms of cutting rates,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “The question is whether these levels will hold, and the only guarantee is another day of volatility.”

Data Watch

Investors continued to watch economic reports for clues on the timing of an interest-rate increase by the Federal Reserve. Data today showed purchases of new homes rebounded in July, bolstering signs the real-estate market is picking up. A separate report showed consumer confidence climbed more than forecast in August, reaching the second-highest level in eight years on more favorable views of the labor market.

Traders are now pricing in a roughly one-in-four chance the central bank will act at its September meeting, from about 48 percent just before the yuan devaluation, as the rout in equity markets has shaken confidence that the global economy will be strong enough to withstand higher U.S. rates.

Fed Bank of Atlanta President Dennis Lockhart said Monday he still expects a rate raise this year, while cautioning that a stronger dollar, a weaker Chinese yuan and falling oil prices complicate the outlook.


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U.S. stocks erased gains after a rebound from the Standard Poor's 500 Index's first correction since 2011 lost momentum.The S P 500 fell 0.6 percent to 1,881.87 at 3:46 p.m. in New York, after an earlier 2.9 percent increase. The index closed Monday in a correction for...
stocks, tumble, rally, fizzles
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2015-14-25
Tuesday, 25 Aug 2015 04:14 PM
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