Traders Peter Tuchman, right, slaps a high five before the closing bell on the floor of the New York Stock Exchange, Wednesday, Dec. 26, 2018.Richard Drew/The Associated Press
The Dow Jones Industrial Average surged more than 1,000 points for the first time on Wednesday, leading a broad Wall Street rebound after a report that holiday sales were the strongest in years helped mollify concerns about the health of the economy.
Following Wall Street’s worst-ever Christmas Eve drop in the previous session, the advance was also fuelled by investors’ reversing bets against a wide range of stocks. By the close, the Dow, S&P 500 and Nasdaq had notched their largest daily percentage gains in nearly a decade.
In a dramatic session that also saw the benchmark S&P 500 come within a whisker of dropping into bear market territory, oil prices surged, boosting sentiment for risk assets such as stocks and underpinning a 6.2-per-cent gain for energy shares. The Toronto Stock Exchange was closed on Wednesday along with markets in Europe, Hong Kong and Australia.
“Today simply can only be really chalked up to a reflex rally after having been oversold,” said Sam Stovall, chief investment strategist for CFRA. “The real question is do we have follow-through for the rest of this week?”
U.S. 2018 holiday sales rose 5.1 per cent from a year ago to more than US$850-billion, the strongest gain in six years, according to a Mastercard report. The S&P 500 retailing index jumped 7.4 per cent, while shares of online retailer Amazon, which touted a “record-breaking” season, climbed 9.4 per cent.
Wednesday’s gains provide the S&P 500 some breathing room after finishing the shortened trading session on Monday just shy of a bear market. It would mark the end to the longest bull market for stocks in modern history after nearly 10 years.
Benchmark U.S. crude, meanwhile, climbed 8.7 per cent to US$46.22 a barrel in New York. Brent crude, used to price international oils, gained 8 per cent to US$54.47 a barrel in London. Both U.S. and Brent crude recorded their largest one-day increase since Nov. 30, 2016, when OPEC signed a landmark agreement to cut production.
The recovery in oil prices also bodes well for the Toronto Stock Exchange, which resumes trading on Thursday. Energy stocks comprise nearly 18 per cent of the S&P/TSX Composite Index.
Markets have been marked by turbulence in recent weeks as the U.S. government shutdown, higher U.S. interest rates and the U.S.-China trade dispute unnerved investors and exacerbated worries over global growth.
Stocks fell sharply on Monday after U.S. President Donald Trump lashed out at the U.S. central bank. Administration officials had spent the weekend trying to assure financial markets that Fed chairman Jerome Powell’s job was secure.
Asked on Wednesday if Mr. Powell’s job was safe, White House economic adviser Kevin Hassett told reporters: “Yes, of course, 100 per cent.” Legal experts say it is not clear whether Mr. Trump could in fact dismiss Mr. Powell.
Mr. Hassett also told Fox Business Network that Mr. Trump was “very happy” with Treasury Secretary Steven Mnuchin, who in recent days has talked with top U.S. bankers and convened a call with a working group of regulators who aim to keep financial markets running smoothly.
The partial U.S. government shutdown may deprive the financial markets of data about international trade and gross domestic product. The Bureau of Economic Analysis said on Wednesday that it’s required to suspend all operations until Congress approves funding, which means that the government might not release its fourth-quarter report on gross domestic product as scheduled for January 30.
“The market is trying to find an equilibrium between earnings, revenue growth and the economy, but when you have an onslaught of headlines that just manifest uncertainty from Washington, it just feeds negative sentiment,” said Quincy Krosby, chief market strategist at Prudential Financial.
The market’s sharp downturn since October intensified this month, erasing all of its 2018 gains and nudging the S&P 500 closer to its worst year since 2008. Despite Wednesday’s rally, stocks are on track for their worst December since 1931, during the depths of the Great Depression.
“This is a market that’s heavily oversold, and typically you expect a strong bounce following that,” Mr. Krosby said.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.79 per cent from 2.75 per cent late on Monday.
The U.S. dollar strengthened to 111.13 yen from 110.41 yen on Monday.
Gold edged up 0.1 per cent to US$1,273 an ounce .