Arthur J. Villasanta – Fourth Estate Contributor
New York, NY, United States (4E) – The Dow’s history-making 1,000 point rally Wednesday is the stuff of legends, but analysts worry this reflex rally after two months of lows will likely be a flash in the pan.
Bargain hunting, among others, drove yesterday’s monster recovery that saw the Dow Jones Industrial Average jump more than 1,000 points, making history as its biggest one-day point-gain ever.
The Dow gained 5 percent or 1,086 points to 22,878. The benchmark S&P 500 gained 5 percent or 116 points to 2,467, while the NASDAQ rose 5.8 percent or 361 points to 6,554. Wednesday’s gains allowed the S&P 500 step back from the brink of a bear market. This would have meant the end to the longest bull market for stocks in modern history after nearly 10 years had it occurred.
Wednesday’s spectacular gains saw investors recoup all their losses from Wall Street’s Christmas Eve plunge. It saw stocks rally across all sectors, giving markets their best single-day percentage gain in 10 years. Energy stocks improved the most as oil prices posted their biggest gain in more than two years.
Economists, however, described the historic market uptick as a “reflex rally” after Monday’s plunge. Despite the rally, Wall Street’s overall performance in December still leaves it on track for its worst December since the Great Depression.
“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.”
A single day’s rally won’t change the overall market picture, however. The market’s massive drop since October worsened this month, wiping-out all of its 2018 gains and hurtling 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.
Analysts said this is a market that remains heavily oversold, and typically investors expect a strong bounce following this situation.
Yesterday, gains in technology companies, retailers, healthcare and internet stocks drove the rally. Energy stocks also recovered as the price of U.S. crude oil posted its biggest one-day gain in more than two years.
Big retailers also profited. Amazon rose 6.9 percent to $1,436.47 while Kohl’s gained 8.3 percent to $64.75. Homebuilders rebounded after an early slide following a report indicating that annual U.S. home price growth slowed in October.
Wednesday’s bounce is appreciated since stocks fell sharply Monday after Trump criticized the Fed for hiking interest rates. Anxious investors began selling-off on fears Trump is dead set on firing Fed chairman Jerome Powell, who Trump is blaming for the economy’s multitude of problems.
Most economists expect U.S. growth to slow in 2019, but not to slide into a full-blown recession. Many economic barometers still look encouraging. Unemployment is at 3.7 percent, the lowest since 1969. Inflation is weak. Salaries and wages have risen, albeit by not that much. Consumers boosted their spending to record levels this holiday season.
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