The S&P 500 Index gained the most in 6 weeks amid speculation the earlier 7.5 percent selloff had gone too far.

(Bloomberg) — U.S. stocks rallied, with the Dow Jones Industrial Average surging 300 points after a 364-point rout yesterday, as crude’s advance past $31 a barrel boosted energy shares helped stabilize global markets rattled by China and falling commodity prices.

The Standard & Poor’s 500 Index gained the most in six weeks amid speculation the 7.5 percent selloff to start the year had gone too far too fast. Energy stocks surged 4.9 percent, with risk-on sentiment getting a boost from dovish comments by the Federal Reserve’s James Bullard. The dollar advanced, while havens from Treasuries to gold slipped.

Crude’s ability to hold above $30, Bullard’s comments tempering rate-hike expectations, JPMorgan’s earnings beat and technical signals that selling had gone too far underpinned the rally in U.S. stocks that had been battered by concern China’s slowdown would derail global growth. Treasuries erased gains after an auction saw weaker demand, while gold’s surge faded.

“This is the relief rally we’ve been waiting for,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion. “Pessimism had grown to such a level that enough cash had been raised on the sidelines to support at least a short-term rally. Better-than- expected earnings could be something for the bulls to grasp and provide this rebound some sustainability.”

Stocks

The S&P 500 climbed 2.2 percent to 1,930.90 at 3:01 p.m. in New York, after falling Wednesday past 1,900, a level its closed below only five times in the past 14 months. Small-cap shares rebounded from the lowest level in 2 1/2 years, while Exxon Mobil Corp. posted the biggest gain in the Dow with a 5.6 percent surge, the most since August.

U.S. benchmarks tumbled more than 7 percent to start 2016 after ending last year little changed. The S&P 500’s plunge yesterday triggered a technical signal that indicates it’s oversold. The gauge’s relative strength index, which measures whether gains or losses have been too fast to sustain, fell below 30, a threshold indicating a rebound may materialize. The last time the RSI was that low was on Aug. 25, when the S&P 500 hit a bottom and rallied 6.5 percent over the next three days.

JPMorgan Chase & Co. climbed 3.2 percent after fourth- quarter profit beat estimates amid lower expenses. Best Buy Co. sank 9 percent and GoPro Inc. tumbled 16 percent after reports showing disappointing holiday sales.

The Stoxx Europe 600 Index declined 1.5 percent, paring losses of as much as 3.3 percent. European shares are down more than 7 percent since the start of 2016.

Emerging Markets

The MSCI Emerging Markets Index lost 0.9 percent, extending its drop this year toward 9 percent. Gulf stocks slid, with benchmarks in Saudi Arabia and Dubai shedding more than 3.3 percent. Shares in Turkey, South Africa, Poland and the Czech Republic slipped.

The Jakarta Composite Index retreated 0.5 percent after the worst attack in the Indonesian capital since at least 2009. Seven people were killed amid explosions and gunfire, including four attackers, Associated Press reported, citing a police spokesman.

In China, the Shanghai Composite Index jumped 2 percent, after dropping 2.8 percent earlier. The Hang Seng China Enterprise Index of mainland shares fell 0.4 percent, taking its loss for 2016 to 12 percent. 

Bonds

Treasuries fell, reversing earlier gains, as a $13 billion sale of 30-year bonds generated lower demand than was seen at a pair of auctions earlier this week. The yield on the 2045 bonds rose two basis points to 2.90 percent, while the 10-year yield dropped added two basis points to 2.11 percent. A sale of 10- year notes on Wednesday was deemed “outstanding” in a survey of five primary dealers conducted by Bloomberg.

The yield on 10-year German bunds, Europe’s benchmark security, added one basis point to 0.57 percent. The yield on Spanish bonds also rose one basis point to 1.78 percent after the nation sold 4.3 billion euros ($4.7 billion) of debt maturing in 2018, 2020 and 2023. Portugal is selling 10-year debt via banks.

Currencies

The Bloomberg Dollar Spot Index rose for the 18th time in 19 sessions and touched the highest level in data going back to 2005. The dollar erased earlier losses against the euro and yen, while the South Korean won and New Zealand dollar led losses against the greenback. 

“The dollar will benefit from a sense of stability from global markets,” said Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington. “That rise in the price of oil off of the lows sends a nascent sense of stability to investors.”

The pound rebounded after dropping to 76.07 pence per euro, the weakest level in almost a year, as Bank of England officials kept the key interest rate at a record low and said the near- term outlook for both U.K. economic growth and inflation has weakened.  

Commodities

The Bloomberg Commodity Index, which tracks raw material returns, was little changed after dropping to the lowest since 1991 on Tuesday. Gold futures fell 0.9 percent to $1,077.30 an ounce as demand for haven assets eased.

West Texas Intermediate oil for February delivery rose as investors reassessed the reasons for a drop in futures to a 12- year low. Futures were up 2.4 percent at $31.20 a barrel after earlier dropping as much as 0.7 percent. Brent added 1.7 percent to $30.82 a barrel.

“We’re getting a bit of a pause after the big drop,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets. “Stocks are up a bit after a big drop yesterday.

–With assistance from Inyoung Hwang, Mark Shenk and Lananh Nguyen.

 

See also:

U.S. stocks climb with dollar, bonds slipping on China, Labor data

BlackRock warns on bonds as Fed officials say economy is sound

Household wealth fell in third quarter, most in four years

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.