Wall Street stocks rebounded on Tuesday from a big drop in a calmer session as analysts pointed to bargain hunting while warning that the market could be in store for more turbulence.
Tokyo, which suffered a record loss Monday, led gains in Asia to close up more than 10 percent, making up some of its losses from a bruising start to the week as traders bought beaten-down stocks.
After Monday’s rout, major US indices spent most of the session in positive territory. The broad-based S&P 500 finished up one percent.
“I’m hopeful that we’ll get some stability back,” said Jack Ablin of Cresset Capital, adding that there could still be “a little more downside risks to the market.”
But the equity market rebound failed to gain much traction in Europe, where the main markets closed narrowly mixed.
Monday’s sell-off followed data Friday showing fewer US jobs than expected were created last month, while another report pointed to continuing weakness in the manufacturing sector.
Monday’s plunge was also triggered by a rally in the value of the yen, which threw a wrench into a common trading strategy of borrowing at low interest rates in Japan and investing in high yielding assets elsewhere, like US tech stocks.
With the Bank of Japan raising interest rates last week and the Federal Reserve poised to cut rates, this so-called yen carry trade was at risk and many investors needed to dump assets to cover their positions, magnifying the rout.
With the yen giving up some of its recent gains Tuesday, the markets were calmer.
“The carry-trade unwinding might have settled down for now, but this market is understandably leery of it revving back up, given how entrenched it had become with Japan holding rates below zero, or near zero, for so long,” said Briefing.com analyst Patrick O’Hare.
David Morrison, senior market analyst at Trade Nation, said “we have no idea how far through the carry-trade unwind we are”, adding “the probability is that this isn’t over.”
Monday’s stock plunge sparked speculation that the US central bank could carry out an emergency interest rate cut to stave off a recession.
But analysts have downplayed that possibility.
“Emergency intervention from the Fed seems unlikely,” said Richard Hunter, head of markets at Interactive Investor.
Among individual companies, Caterpillar gained 3.0 percent after reporting better-than-expected profits as strong pricing offset the hit from lower revenues.
Uber surged 10.9 percent as it reported higher profits on a 16-percent rise in revenues to $10.7 billion. Company officials pointed to strong demand from frequent users.
– Key figures around 2030 GMT –
New York – Dow: UP 0.8 percent at 38,997.66 (close)
New York – S&P 500: UP 1.0 percent at 5,240.03 (close)
New York – Nasdaq Composite: UP 1.0 percent at 16,366.85 (close)
London – FTSE 100: UP 0.2 percent at 8,026.69 (close)
Paris – CAC 40: DOWN 0.3 percent at 7,130.04 (close)
Frankfurt – DAX: UP less than 0.1 percent at 17,354.32 (close)
EURO STOXX 50: UP 0.1 at 4,575.22 (close)
Tokyo – Nikkei 225: UP 10.2 percent at 34,675.46 (close)
Hong Kong – Hang Seng Index: DOWN 0.3 percent at 16,647.34 (close)
Shanghai – Composite: UP 0.2 percent at 2,867.28 (close)
Dollar/yen: UP at 144.68 yen from 144.18 yen on Monday
Euro/dollar: DOWN at $1.0933 from $1.0952
Pound/dollar: DOWN at $1.2691 from $1.2776
Euro/pound: UP at 86.12 pence from 85.71 pence
Brent North Sea Crude: UP 0.2 percent at $76.48 per barrel
West Texas Intermediate: UP 0.4 percent at $73.20 per barre
burs-jmb/dw
