U.S. Stocks Show Significant Rebound After Early Sell-Off

Stocks showed a substantial turnaround over the course of the trading session on Monday, recovering strongly after another sell-off. The major averages all bounced well off their lows of the session and into positive territory.

The Dow was down more than 1,000 points at its worst levels but ended the day up by 99.13 points or 0.3 percent at 34,364.50. The blue chip index rebounded after hitting its lowest intraday level in over nine months.

The Nasdaq and the S&P 500 also showed significant rebounds after hitting multi-month lows. After plunging by as much as 4.9 percent, the Nasdaq climbed 86.21 points or 0.6 percent to 13,855.13, while the S&P 500 rose 12.19 points or 0.3 percent to 4,410.13 after dipping into correction territory.

The stunning turnaround came as traders went bargain hunting following recent weakness on Wall Street, with some analysts describing the sell-off as “overdone.”

Concerns about tightening monetary policy continued to weigh on the markets early in the session ahead of this week’s Federal Reserve meeting.

The Fed is scheduled to begin a two-day meeting on Tuesday, with the latest monetary policy decision due Wednesday afternoon.

While the Fed is likely to leave interest rates unchanged, the accompanying statement could hint at the first rate hike as early as the next meeting in mid-March.

Along with the Fed announcement, reports on consumer confidence, new home sales, durable goods orders and personal income and spending may attract attention in the coming days.

Sector News

Housing stocks moved sharply higher over the course of the trading session, driving the Philadelphia Housing Sector Index up by 3.1 percent. The index rebounded strongly after hitting its lowest intraday level in three months.

Significant strength also emerged among oil service stocks, as reflected by the 2.3 percent jump by the Philadelphia Oil Service Index. The turnaround by the sector came even though the price of crude oil for March delivery tumbled $1.83 to $83.31 a barrel.

After seeing early weakness, industry giant Halliburton (HAL) helped lead the rebound after reporting better than expected fourth quarter earnings.

Retail, biotechnology and telecom stocks also showed notable moves to the upside as the day progressed, while weakness remained visible among pharmaceutical and utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan’s Nikkei 225 Index rose by 0.2 percent, while Hong Kong’s Hang Seng Index slumped by 1.2 percent.

Meanwhile, the major European markets all showed substantial moves to the downside on the day. While the U.K.’s FTSE 100 Index tumbled by 2.6 percent, the French CAC 40 Index and the German DAX Index plunged by 3.8 percent and 4 percent, respectively.

In the bond market, treasuries moved modestly higher, extending the upward trend seen over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 1.735 percent.

Looking Ahead

A report on consumer confidence in the month of January may attract some attention on Tuesday, although traders are likely to remain focused on the upcoming Fed announcement.

On the earnings front, tech giant IBM Corp. (IBM) is among the companies releasing their quarterly results after the close of today’s trading.

3M (MMM), American Express (AXP), General Electric (GE), Johnson & Johnson (JNJ), and Verizon (VZ) are also among the companies due to report their results before the start of trading on Tuesday.

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