By Chris Dieterich
U.S. stocks swung higher on Tuesday, rebounding after three
straight days of deep declines.
The Dow Jones Industrial Average rose 89 points, or 0.5%, to
16409 in afternoon trading. The S&P 500 added 16 points, or
0.8%, to 1891, while the Nasdaq Composite Index rose 43 points, or
1%, to 4257.
Sectors that have been hardest hit recently rose the most on
Tuesday, though volumes were lighter than in recent days. The
Russell 2000 Index of small U.S. companies jumped 1.9% in a sharp
bounce after a string of large declines. Energy stocks on the
S&P 500, recently battered by tumbling prices for crude oil,
jumped 0.7%.
Shares of travel and airline stocks also rebounded after taking
a hit on concerns about the spread of the Ebola virus. United
Continental Holdings Inc. and Delta Air Lines Inc. rallied Tuesday
after sinking 7.3% and 6.1% on Monday, respectively.
Stocks rose even as investors piled into government bonds.
Yields on benchmark 10-year Treasury notes fell to 2.232%, from
2.305% late on Friday. Bond yields fall when prices rise. U.S. bond
markets were closed on Monday for Columbus Day.
Uncertainty about the pace of global economic growth and changes
to the Federal Reserve's easy-money policies have combined to force
stocks suddenly and sharply lower in recent weeks. The Dow
industrials slumped 223 points on Monday for their ninth decline
over the past 11 trading days.
Many investors are telling clients not to back out of the market
given that the U.S. economy continues to improve. Sam Wardwell,
investment strategist at Pioneer Investments, which oversees about
$250 billion, said that he is telling clients not to panic in the
face of recent declines.
"Clearly there's volatility," Mr. Wardwell said. "This 100-up,
100-down trading tells you that there are a lot of nervous people
out there."
"Our message has been that this is normal, markets can be
volatile and there is no reason to panic and change your investment
strategy," he said.
Andrew Slimmon, managing director of Morgan Stanley Wealth
Management's Global Investment Solutions, which manages about $4.1
billion, said that his firm's financial advisers have been "getting
calls from clients that are nervous" in recent weeks, but that he
has increasingly viewed the U.S. as a better place to invest in
stocks than Europe or Japan over the course of this year. That
remains the case now, he said.
"It makes sense to ride this out," Mr. Slimmon said. "The safest
place to be is in the U.S. The economy is much stronger here than
in Europe."
Traders noted that major benchmarks closed near the day's lows
in each of the past three sessions, including a late-day swoon on
Monday, an indication that few buyers were ready to step in with
conviction to buy the falling market.
"We're seeing a little of a bounce, though I'd caution that it's
early," said Ryan Larson, head of U.S. equity trading at RBC Global
Asset Management. "The market has tended to show its true hand in
the last hour."
"Action we've seen in the [last] couple of weeks hasn't been as
much about fundamentals as it has been about sentiment," Mr. Larson
said.
The S&P 500 finished Monday down 6.8% since closing at an
all-time high on Sept. 18, its steepest pullback since late 2012,
when investors wrestled with the implications of the so-called
fiscal cliff and political stalemate in Washington, D.C.
Most European equity markets reversed course to end higher after
Germany's closely watched ZEW survey showed a sharp drop in
economic sentiment. The Stoxx Europe 600 ended marginally lower,
paring losses of as much as 1.4% earlier. Germany's DAX rose 0.15%.
German government bonds surged to their strongest level on
record.
J.P. Morgan Chase swung to a third-quarter profit, but narrowly
missed analyst estimates, as legal expenses overshadowed gains in
fixed-income trading revenue. J.P. Morgan benefited from stronger
investment banking fees, but saw a slump in debt capital markets.
Shares rose 0.4%.
Citigroup said its quarterly profit rose 6.6% from a year
earlier, topping analyst estimates, helped by
stronger-than-expected trading revenues. The firm set plans to
further retreat from some foreign retail-banking markets. Shares
rose 3.1%.
Wells Fargo's quarterly profit met Wall Street's profit
expectations, though results showed a continued slowdown in the
bank's mortgage business. Shares declined 1.4%.
Johnson & Johnson declined 0.8% even after the health-care
products company said its quarterly earnings rose 59% on higher
pharmaceutical sales. The company's report is considered a
bellwether since the maker of Band-Aids and Listerine mouthwash is
involved in so many business lines.
Oil prices continued to spiral lower. U.S. crude futures
declined 2.5% to $83.64. Increased production in the U.S. has
helped contribute to a glut of global oil supply at a time when
demand for petroleum products, notably in Europe, is ebbing.
In Asia, Japan's Nikkei fell 2.4%, while Hong Kong's Hang Seng
index declined 0.4%. The dollar rose against the euro and yen. Gold
futures added 0.3% to $1,233.50 an ounce.
Write to Chris Dieterich at chris.dieterich@wsj.com