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Dec 27, 2018

Bulletin: Dow turns positive as stocks unwind sharp selloff

William Watts, Barbara Kollmeyer

Volatility continued to reign Thursday, with the Dow Jones Industrial Average erasing a loss of more than 600 points to edge into positive territory ahead of the closing bell.
The rebound comes after stocks struggled to build on the previous session’s sharp rally, which in turn was a snapback from the worst Christmas Eve performance in history.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, +0.18%  was up 96 points, or 0.4%, at 22,975, after dropping as much as 611 points at its session low. The S&P 500 SPX, -0.03%  also erased a sharp decline to rise 4 points, or 0.2%<,to 2,472. The Nasdaq Composite COMP, -0.43%  trimmed a loss of more than 3% and was down 10 points, or 0.2%, at 6,544.
On Wednesday, the Dow ended with a gain of 1,086.25 points, or 5%, at 22,878.45. The S&P 500 soared 5% to end at 2,467.70. The Nasdaq rose 5.8% to 6,554.36.
Read: Why stock-market investors fear historic rebound was just a ‘wicked bear trap’
The Dow’s Wednesday rebound marked its largest-ever one-day point rise. On the more relevant percentage basis, all three major indexes logged the strongest one-day gains since March 23, 2009, and it was the best ever day-after-Christmas performance for the equity gauges. It comes on the heels of a brutal selloff in a shortened Christmas Eve session Monday, which featured the lowest closes for all three indexes since 2017.
Read: As stocks suffer a December rout, Wall Street strategists bet on 2019 gains
Opinion: What will stop a bear market for stocks in 2019
What’s driving the market?
Volatility looked set to stick with the market, which tends to see quieter-than-normal volumes due to the Christmas holidays. Stocks will see another break in trade next week when markets close for New Year’s Day.
And while investors got an assurance over Federal Reserve Chairman Jerome Powell’s job on Wednesday, there remains no resolution to other big issues, such a continuing government shutdown as Washington tussles over funding for Trump’s proposed border wall.
There was upbeat news for global trade, with the U.S. expected to send a delegation to hold talks with Chinese officials during the week of Jan. 7, according to Bloomberg News. It would mark the first meeting since the G-20 summit in Argentina earlier this month, which yielded a 90-day tariff truce.
However, trade optimism might be tempered by a report from Reuters that the Trump administration is moving closer to issuing an executive order in the new year that would ban U.S. companies from using telecommunications equipment made by China’s Huawei 002502, -3.63%  and ZTE 000063, +0.20%
See: ‘Robin Hood of Wall Street’ says be wary of Trump’s advice to buy stock-market dip
What are investors saying?
Investors were likely to take some comfort in the market’s ability to come back from the initial decline as analysts sought to make sense of Wednesday’s surge.
“Such rallies are not uncommon in troubled times, and we have experienced many of them in past bear markets. To call for a bottom, we need at least a couple of days of strength, not just in price, but also in trading volume, breadth of the market, and fundamentally supported environment,” said Hussein Sayed, market strategist at FXTM, in a note.
Heightened stock-market volatility has complicated end-of-year tax-loss selling efforts, ensuring that such harvesting is likely to continue through year-end, likely serving as another cap on the market, said Tom Martin, senior portfolio manager at Globalt, in a phone interview. Tax-loss selling typically begins around November and is often wrapped up by mid-December.
Read: Here’s why the stock market’s big bounce doesn’t mean investors will outrun the bear
How are other markets trading?
West Texas Intermediate crude prices CLG9, -1.43%  fell nearly 3% to $44.86 a barrel, after snapping back by 8% on Wednesday.
European stock markets reopened Thursday with losses after an extended Christmas break.
In Asia, the Nikkei 225 index NIK, +3.88%  soared 3.9%, though China’s Shanghai Composite Index SHCOMP, -0.61%  eased 0.6%.
The ICE Dollar Index DXY, -0.45% slipped 0.6%, while gold GCG9, +0.30% was firmer.
What’s on the economic calendar?
The partial government shutdown means investors won’t see a full economic calendar. Weekly jobless claims data were released, but November data on new home sales were delayed to another day.
First-time claims for unemployment benefits fell by 1,000 to 216,000 in the week ended Dec. 22, the Labor Department said Thursday. Economists polled by MarketWatch had forecast a reading of 217,000.
The Conference Board said its consumer-confidence index dropped to 128.1 this month from a revised 136.4 in November. Economists polled by MarketWatch had forecast a 133.3 reading.
Read: Government shutdown: What economic reports are suspended?

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