By Riva Gold and Akane Otani
-- Stocks in U.S., Europe, Asia mostly higher
-- Energy sector leads in S&P 500
-- Crude oil rebounds
U.S. stocks bounced higher Monday following two bruising weeks,
lifted by a rally in shares of oil-and-gas companies.
At 4 p.m. ET, the Dow Jones Industrial Average jumped 409
points, or 1.7%, to 24600, following its largest one-week
percentage decline in more than two years. The S&P 500 rose
1.4%, and the Nasdaq Composite added 1.6%.
Monday's gains were broad, lifting 10 of the S&P 500's 11
sectors higher for the day. Still, major stock indexes remain
sharply lower for the month, following a heavy bout of selling that
analysts and investors have attributed to failed bets on low stock
market volatility, rising bond yields and concerns about a possible
pickup in inflation.
Investors have been questioning whether the declines, which have
erased the S&P 500 and Dow industrials' gains for the year,
reflect a short-term technical correction or the start of a more
profound reassessment of the financial climate in light of less
support from central banks.
"I think this is a healthy squeezing out of some over-optimism,"
said James Norman, head of equity strategy at QS Investors. Still,
if inflation rises faster than expected, the Federal Reserve will
need to pick up the pace on interest-rate increases, which would
also lift government bond yields. That could hurt growth and reduce
the appeal of companies that have taken on a lot of debt, he
added.
Shares of energy companies rose with oil prices Monday, giving
major indexes a boost.
The S&P 500 energy sector rose 1.8%, among the biggest gains
of the broad index's 11 sectors, while U.S. crude oil rose 1.1% to
$59.87 a barrel after sliding last week on worries about rising
U.S. production.
Meanwhile, government bonds weakened, with the yield on the
benchmark 10-year U.S. Treasury note -- which rises as bond prices
fall -- recently at 2.862%, compared with 2.829% Friday. Rising
bond yields had spooked some equity investors last week, raising
concerns about the possibility of central banks increasing interest
rates faster than expected.
"The economy is truly improving and interest rates are truly
heading higher -- the average investor did not really believe
that," said Brian Belski, chief investment strategist at BMO
Capital Markets. "All of a sudden, a dose of reality came in," he
added.
Kokou Agbo-Bloua, global head of flow strategy and solutions at
Société Générale, described the recent pullback in stocks as
primarily an unwinding of crowded trades, exacerbated by a need to
cover short positions on volatility.
"We aren't seeing panic of any sort," he said, although he noted
the next few days would be very important to watch for any kind of
negative feedback loop.
Outside the equity market, demand for haven assets such as gold
has been muted, while stocks and bonds in emerging markets and
riskier pockets of Europe have held up well, suggesting investors
remain encouraged about the global economy. Credit spreads have
mostly remained tight, reflecting continued optimism about the
outlook for the corporate sector.
"The reaction in [credit] spreads, for the time being, has been
relatively muted because of the good fundamentals of corporate
balance sheets," said Gilles Pradère, fixed income portfolio
manager at RAM Active Investments.
Earlier, stocks across Europe rallied, lifting the Stoxx Europe
600 up 1.7%.
The Shenzhen Composite, home to smaller-cap stocks in China, led
gains in Asia, jumping 2.6% after coming under pressure last week.
The Shanghai Composite rose 0.8%, its biggest gain since January
23.
Over the weekend, state-run media reported that the period of
volatility for Chinese stocks may be over, said Ivan Ip, a stocks
strategist at UOB Kay Hian. "That was taken as a cue to invest by
local traders," he added.
South Korea's Kospi closed up 0.9%, while Hong Kong's Hang Seng
reversed gains late in the session to edge down 0.2%. Markets in
Tokyo were shut for a holiday.
Kevin Kingsbury and Kenan Machado contributed to this
article
Write to Riva Gold at riva.gold@wsj.com and Akane Otani at
akane.otani@wsj.com
(END) Dow Jones Newswires
February 12, 2018 16:20 ET (21:20 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.