U.S. stocks rallied the most since 2011, halting a six-day rout, as investors found some relief after the worst global equity rout in almost four years. Treasuries fell and the dollar rose.
The Dow Jones industrial average closed up 619.07, or 3.95%, at 16,285.51; the S&P 500 rose 72.90, or 3.9%, closing at 1,940.51; and the Nasdaq composite was up 191.05, or 4.24%, to close at 4,697.54. All numbers are preliminary.
The increases came amid a second day of dramatic swings in equity markets, succeeding where a rally Tuesday failed in the final hours of trading. Two things that have supported U.S. stocks in the past, dovish words from the Federal Reserve and improving economic data, halted a plunge that erased $2.2 trillion from share values.
Volatility could be seen throughout financial markets. Commodities resumed their decline following a reprieve Tuesday. Gold fell for a third day, the longest stretch in a month, while copper led industrial metals lower and crude traded below $40 a barrel.
Earlier attempts to push equities higher fell short across the globe. The Shanghai Composite index ended 1.3% lower despite an early 4.3% surge. The Stoxx Europe 600 index lost 1.8% after declining as much as 2.7%, at one point erasing all those losses before tumbling again.
Canadian equities erased a 1.6% surge in their first half-hour of trading.
Concern that Chinese policymakers might fail to prevent a hard landing in the world’s second-largest economy has convulsed global markets. About $8 trillion has been erased from the value of global equities since China’s surprise devaluation of the yuan on Aug. 11 as investors weighed prospects for slowing growth and the first interest-rate increase in the U.S. in almost a decade.
The sell-off in equities broke a calm in a stock market that had gone almost four years without a 10% correction. The S&P 500 plunged 11% in the six days through Tuesday, the most since the U.S. was stripped of its AAA credit rating by S&P in August 2011, and was 1% away from erasing its gains since the end of 2013.
The Chicago Board Options Exchange Volatility index slipped 17% to 30.04. The measure of market turbulence known as the VIX declined for a second day after a record six-day jump sent the gauge to its highest level since October 2011.
Global stock market turmoil has weakened the case for raising interest rates in September, Federal Reserve Bank of New York President William C. Dudley said, cautioning it’s important not to overreact to short-term developments.
Treasuries fell, pushing 10-year yields to a one-week high, as a report showed unexpected strength in orders for durable goods while advancing stocks dimmed interest in government bonds. The benchmark U.S. 10-year note yield rose 11 basis points to 2.19%.
The MSCI Emerging Markets index was little changed, after rallying 2.2% on Tuesday, the most in two years. Equity gauges in India, and Saudi Arabia and South Africa lost more than 1%. South Korea’s Kospi jumped 2.6%, capping the biggest two-day rally since June 2013, as tensions between North and South Korea eased.
The Bloomberg Commodity index retreated 1.3%. Copper fell 2.6% and gold lost 1.2% to $1,124.60 an ounce.
West Texas Intermediate fell 1.8% to $38.60 a barrel, having earlier risen as much as 1.4%.