By Saumya Vaishampayan And Tommy Stubbington
Global stocks bounced back Tuesday, as a relatively muted
decline in Chinese shares allowed investors to focus on upbeat
corporate earnings and the Federal Reserve's monetary-policy
meeting.
Tuesday's gains in the U.S. and Europe afforded traders a break
from a global selloff that had dragged the Dow Jones Industrial
Average to its lowest level in nearly six months. Driving the
selloff were worries that the plunge in Chinese stocks that began
in June was a harbinger of slower growth in the world's
second-largest economy.
The Dow and the S&P 500 both wiped out Monday's losses. The
Dow climbed 185 points, or 1.1%, to 17625.
In Europe, the Stoxx Europe 600 ended the session 1.1% higher,
snapping a five-session losing streak.
Investors are now looking ahead to Wednesday's statement from
the Federal Reserve after a two-day meeting that began Tuesday,
seeking clues on the timing of an interest-rate increase that some
expect as early as September.
"The only question will be the timing of the liftoff," said
Aaron Clark, portfolio manager at GW&K Investment Management,
which manages $25.4 billion. "The Fed wants to add some bullets
back in the chamber so it can have some room to ease in a
downturn."
Major stock indexes tumbled on Monday after the Shanghai
Composite Index posted its biggest single-day decline in eight
years.
The Dow has backed away from its last record high, set in
mid-May. In addition to worries about China, the turmoil in Greece
has prompted some investors to lower their exposure to risky assets
such as stocks.
The Shanghai Composite ended 1.7% lower on Tuesday, after
falling as much as 5% during the session. Wild swings in Chinese
stocks have captivated global investors in recent weeks and sparked
fears about whether the deep stock declines could weigh on global
growth. That the Shanghai Composite rebounded from its lows of the
session reassured investors, said Mike Ryan, chief investment
strategist for UBS Wealth Management Americas.
"The concern after yesterday was would we see another rout
taking place in China," said Mr. Ryan. "The deeper that decline,
the more the risk it begins to spread across markets and have an
effect on the real economy," he added.
Chinese policy makers' support should also not be underestimated
and moves in Chinese stocks are a poor barometer for what is
happening in the country's economy, which is of far greater concern
to investors, said Eric Lascelles, chief economist at RBC Global
Asset Management, which has around $307 billion under management
globally.
"The Chinese government is taking truly extraordinary steps to
support the market, and additional action seems likely," he
said.
The S&P 500 gained 25 points, or 1.2%, to 2093. The Nasdaq
Composite was up 49 points, or 1%, to 5089.
Energy stocks were up 3.2%, buoyed by higher oil prices, but
remain down 5.8% for July.
Crude-oil futures gained 1.1% to $47.90 a barrel, and gold
futures fell 0.1% to $1,095.20 an ounce.
Demand for haven assets waned. Treasury prices fell, pushing the
10-year yield up to 2.249% from 2.228% on Monday.
In economic indicators, U.S. consumer confidence fell more than
expected. The Conference Board, a private research group, said
Tuesday that consumer confidence index fell to 90.9 in July. The
index, which is at its lowest level since September, was forecast
to drop to 100.0.
U.S. home price growth continued, according to the
S&P/Case-Shiller Home Price Index. The index covering the
nation rose 4.4% in the 12 months ended in May, slightly higher
than the 4.3% April increase. However, some investors said
continuing price rises could make it harder for first-time buyers
to afford homes, which could dampen home building.
"The Case-Shiller is indicative that you are seeing housing
prices increasing at almost twice the rate of inflation with wages
essentially being static for the majority of the population," said
James Abate, chief investment officer of Centre Funds, which has
about $1 billion under management. "Outside of the major cities it
doesn't look like we are going to see any sharp acceleration in
home building."
Corporate earnings also attracted attention.
Baidu's stock declined 17%, weighing on other Internet stocks,
after its projected revenue for the current quarter missed Wall
Street's expectations.
Ford Motor Co. reported a 44% jump in net income for the second
quarter, as its performance in North America rebounded from a
sluggish first quarter. Shares rose 2.4% as per-share earnings beat
expectations.
Pfizer Inc. lifted its outlook for the year as its new
treatments continued to drive growth in the second quarter. Shares
rose 2.4%.
DuPont Co. trimmed its earnings outlook for the year as the
company reported quarterly earnings. Shares slipped 1.3%.
Austen Hufford contributed to this article.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and
Tommy Stubbington at tommy.stubbington@wsj.com