US: Wall Street roars back to life in best session in 9 years

[NEW YORK] Wall Street stocks roared back to life on Wednesday, shaking off four straight routs following strong retail sales data and White House reassurances that Fed Chair Jay Powell won't be fired.

The Dow Jones Industrial Average finished up nearly 1,100 points, or about five per cent, at 22,878.45.

The broad-based S&P 500 also surged five per cent to 2,467.70, while the tech-rich Nasdaq Composite Index advanced 5.8 per cent to 6,554.36.

The US gains were the biggest for a single session on Wall Street in nine years, a surge analysts attributed in part to technical factors after days of selling.

"It's coming off of oversold conditions and it was frankly due for a bounce," said Matt Miskin, market strategist at John Hancock Investments.

"Sentiment can be fickle in times like these, so it's important to not get whipsawed."

Still, the session was not without its shaky moments. After opening solidly higher, the Dow briefly sank into the red in mid-morning before recovering and gathering steam throughout the day.

Earlier, Tokyo closed higher on Wednesday, logging its first positive finish in six sessions. Chinese stocks closed slightly lower, while Seoul also dropped.

Financial markets in Australia, Hong Kong were closed for a public holiday, along with bourses in London, Paris and Frankfurt.

MORE WEAKNESS AHEAD?

Many investors have been unnerved by a variety of factors, including the partial US government shutdown, the US-China trade war and Trump's ongoing criticism of Fed Chair Powell.

The sense of bearishness among investors is "just huge," said Karl Haeling of LBBW.

"From a tactical standpoint, you can expect a reflex rally," said Canaccord Genuity equity strategist Tony Dwyer in a note released ahead of Wednesday's session. "But it is hard to find an extreme oversold low that is not retested."

Yet some analysts have argued that the stock market's weakness in December has been disproportionate to economic conditions at a time when unemployment is low and growth is still solid.

"Our judgment is that the US economy remains solid at the moment," though investors need to pay attention to the possible impact of US trade rows with other countries on financial markets and business outlooks, said a report by Norio Miyagawa, senior economist at Mizuho Securities.

"As financial markets regain their calm, we expect US stocks and the dollar will track higher," he said.

Data from Mastercard SpendingPulse showed US holiday sales increased 5.1 per cent this holiday season to more than US$850 billion, the biggest growth in the last six years.

White House economic advisor Kevin Hassett sought to reassure on Powell's prospects, telling ABC News the Fed chief is "100 per cent" safe. The remarks followed weekend media reports that US President Donald Trump has discussed firing Powell.

Analysts also took heart from a nearly nine percent jump in US oil prices, the biggest in more than two years and another bounce back following recent weakness in petroleum markets.

Retailers were especially strong, with Amazon soaring 9.5 per cent after declaring that its notched new records in holiday sales, fueled by "tens of millions" of new subscriptions or free trials of its Prime service.

Petroleum-linked shares also had a good session, with Chevron winning 6.3 per cent and Halliburton 5.1 per cent following the rally in oil prices.

AFP

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