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U.S. Stocks Move Higher After China Moves to Support Economy Stock Market Rebound Falls Apart in Late Afternoon
(about 2 hours later)
■ The Standard & Poor’s 500-stock index is up 1.3 percent in afternoon trading, losing some of the strength it showed earlier in the day. The Dow Jones industrial average is trading 220 points, or 1.4 percent higher. ■ American markets lost big gains made earlier in the day and finished Tuesday in the red.
■ In China, the benchmark Shanghai composite index closed 7.6 percent lower. Chinese officials later cut interest rates and eased banks’ reserve requirements.■ In China, the benchmark Shanghai composite index closed 7.6 percent lower. Chinese officials later cut interest rates and eased banks’ reserve requirements.
■ Most other markets in Asia stabilized or rallied modestly. An exception was Japan, where stocks closed down 4 percent.■ Most other markets in Asia stabilized or rallied modestly. An exception was Japan, where stocks closed down 4 percent.
■ European equities rebounded, clawing back most of Monday’s losses. The Euro Stoxx 50 closed up 4.7 percent. In London, the FTSE 100 ended the day 3.1 percent higher. ■ European equities rebounded, recovering most of Monday’s losses. The Euro Stoxx 50 closed up 4.7 percent. In London, the FTSE 100 ended the day 3.1 percent higher.
■ The international and American oil benchmarks rebounded, despite concerns about oversupply. ■ The international and American oil benchmarks bounced back, despite concerns about oversupply.
Stock prices in the United States showed signs on Tuesday of recovering from a three-day rout, but the market rally softened as the day went on. A strong rally in the stock market faded rapidly on Tuesday afternoon, killing hopes for an end to the recent turmoil in the markets.
The Standard & Poor’s 500-stock index was up 1.3 percent in afternoon trading, after earlier rising almost 3 percent from Monday’s close. The Dow Jones industrial average was up 220 points, or 1.4 percent, on Tuesday afternoon, after falling almost 10 percent over the last week. The Nasdaq was trading 2.1 percent higher. European stock markets had posted even stronger gains when they closed, making up most of the losses suffered Monday. The Standard & Poor’s 500-stock index closed down 1.4 percent, to 1,867.62, after earlier rising almost 3 percent from Monday’s close. The Dow Jones industrial average finished the day down 1.3 percent, off 205 points, at 15,666.44. The Dow was up as much as 441 points in the morning.
The bounce-back came even after more steep losses for Chinese stocks. Shanghai stocks closed down 7.6 percent on Tuesday, after Monday’s 8.5 percent plunge. But after the markets closed in China, Beijing officials took strong measures to stabilize financial markets by cutting interest rates and reducing the amount of money banks are required to keep on hand to guard against risk. Tech stocks also fell after climbing earlier in the day, with the Nasdaq finishing 0.4 percent lower, to 4,506.49.
Elsewhere in Asia, the free fall of the last few days appeared to have ended. Japan was an exception: Stocks were off 4 percent. Stocks fell sharply in late afternoon after an optimistic morning of trading, while European stock markets posted strong gains, making up most of the losses suffered Monday.
It is too soon to know whether the rebound outside China will last — and if Chinese stocks will be helped by the latest government measures — but a growing chorus of analysts has been saying that the recent global sell-off of stocks and commodities was an overreaction to China’s specific economic and financial market problems. Chinese stocks posted deep losses again on Tuesday. Shanghai stocks closed down 7.6 percent, after Monday’s 8.5 percent plunge. But after the markets closed in China, Beijing officials took strong measures to stabilize financial markets by cutting interest rates and reducing the amount of money banks are required to keep on hand to guard against risk.
Elsewhere in Asia, the free fall of the last few days appeared to have ended, with the Hang Seng in Hong Kong up modestly but emerging markets like India faring better.
It is too soon to know whether the rebound outside China will last — and if Chinese stocks will be helped by the latest government measures — but more analysts have been saying that the recent global sell-off of stocks and commodities was an overreaction to China’s specific economic and financial market problems.
“The rest of the world doesn’t seem to be tied as closely to China as perhaps we have feared,” said Jack Ablin, the chief investment officer at Harris Private Bank. “We’ll see how this holds. Typically, these are one-off bounces, and we’ll have to see what direction this market takes us.”“The rest of the world doesn’t seem to be tied as closely to China as perhaps we have feared,” said Jack Ablin, the chief investment officer at Harris Private Bank. “We’ll see how this holds. Typically, these are one-off bounces, and we’ll have to see what direction this market takes us.”
In the United States, investors were reminded of the strength of the economy by new data out on Tuesday morning showing that consumer confidence rose in August and that new-home sales rose in July.In the United States, investors were reminded of the strength of the economy by new data out on Tuesday morning showing that consumer confidence rose in August and that new-home sales rose in July.
Markets around the world have been jolted in recent days by concerns about China’s ability to continue as a powerful engine of global economic growth. That has added to worries about the potential impact of higher interest rates in the United States, if the Federal Reserve sticks with its stated intention to raise its benchmark rate soon.Markets around the world have been jolted in recent days by concerns about China’s ability to continue as a powerful engine of global economic growth. That has added to worries about the potential impact of higher interest rates in the United States, if the Federal Reserve sticks with its stated intention to raise its benchmark rate soon.
The sell-off had weighed heavily on commodities and regional currencies, pushing the prices of many to their lowest levels since the financial crisis. But on Tuesday, at least, futures contracts for American and European benchmark oil prices rose sharply.The sell-off had weighed heavily on commodities and regional currencies, pushing the prices of many to their lowest levels since the financial crisis. But on Tuesday, at least, futures contracts for American and European benchmark oil prices rose sharply.
Many Asian currencies rose against the dollar for the first time in days. The yen, a regional haven currency, slipped against the dollar after a four-day rally. In Europe, the euro was down slightly against the dollar. American stocks have considerable ground to regain. In the United States, for example, by the time Monday’s seesaw ride ended, the benchmark S.&P. 500 was off 11 percent from its May high, called a correction in market parlance, its first since 2011.
Even if they continue to bounce back, stocks have considerable ground to regain. In the United States, for example, by the time Monday’s roller-coaster ride ended, the benchmark S.&P. 500 was down 3.9 percent. That left the index off 11 percent from its May high, called a “correction” in market parlance, its first since 2011. The recent market turmoil has led many investors to turn their focus to the government officials who have become the most important players in the market since the financial crisis.
Beyond the questions about what exactly caused Monday’s moves, the recent market turmoil has led many investors to turn their focus to the government officials who have become the most important players in the market since the financial crisis.
The biggest questions involve the health of China’s economy and the capacity of the country’s leaders to manage its slowdown. On Tuesday, China’s premier, Li Keqiang, said that despite the market turbulence, the economy remained sound.The biggest questions involve the health of China’s economy and the capacity of the country’s leaders to manage its slowdown. On Tuesday, China’s premier, Li Keqiang, said that despite the market turbulence, the economy remained sound.
But after the further fall in Chinese stock markets, China’s central bank late on Tuesday announced cuts to interest rates, as well as to reserve rate requirements for banks. It was the fifth rate cut since November.But after the further fall in Chinese stock markets, China’s central bank late on Tuesday announced cuts to interest rates, as well as to reserve rate requirements for banks. It was the fifth rate cut since November.
The move brought interest rates down 0.25 percentage point, lowering the one-year lending rate to 4.6 percent, and reduced the reserve rate requirement 0.5 percentage point.The move brought interest rates down 0.25 percentage point, lowering the one-year lending rate to 4.6 percent, and reduced the reserve rate requirement 0.5 percentage point.
The central bank, called the People’s Bank of China, said the cuts would “further lower the costs of capital for businesses.”The central bank, called the People’s Bank of China, said the cuts would “further lower the costs of capital for businesses.”
“Currently, there are persisting downward pressures on the country’s economic growth,” the bank said in an explanation that accompanied the announcement. “There has also been quite large volatility in global capital markets recently, and monetary policy tools need to be applied more flexibly.”“Currently, there are persisting downward pressures on the country’s economic growth,” the bank said in an explanation that accompanied the announcement. “There has also been quite large volatility in global capital markets recently, and monetary policy tools need to be applied more flexibly.”
The central bank also removed the upper limit on interest rates for fixed-term deposits of more than one year. With inflation in China generally low, the central bank said the time was ripe for such steps.The central bank also removed the upper limit on interest rates for fixed-term deposits of more than one year. With inflation in China generally low, the central bank said the time was ripe for such steps.
Analysts said the moves appear to be focused more on stabilizing the Chinese economy than on the struggling stock market.Analysts said the moves appear to be focused more on stabilizing the Chinese economy than on the struggling stock market.
“The change of tack may signal that policy makers have finally conceded that their efforts to determine prices are futile,” Mark Williams, the chief Asia economist at Capital Economics, wrote in a note to clients. “Instead, the focus now is on supporting the economy.”“The change of tack may signal that policy makers have finally conceded that their efforts to determine prices are futile,” Mark Williams, the chief Asia economist at Capital Economics, wrote in a note to clients. “Instead, the focus now is on supporting the economy.”
Beyond China, there is a growing debate among market participants about whether the Federal Reserve will still follow through with plans to push interest rates higher, an action that was expected to begin in September. The market turmoil has led some, including Lawrence H. Summers, a former chief economic adviser to President Obama, to call for the central bank to reconsider those plans.Beyond China, there is a growing debate among market participants about whether the Federal Reserve will still follow through with plans to push interest rates higher, an action that was expected to begin in September. The market turmoil has led some, including Lawrence H. Summers, a former chief economic adviser to President Obama, to call for the central bank to reconsider those plans.
The debates in both China and the United States have often turned to more worrying questions about whether the levers that central bankers use to influence the markets are losing their power after years of extensive intervention.The debates in both China and the United States have often turned to more worrying questions about whether the levers that central bankers use to influence the markets are losing their power after years of extensive intervention.
“They’ve pretty much pulled out all the stops already,” said Mr. Ablin of Harris Private Bank. “Now they are just waiting patiently for them to take a fuller effect in the economy.”“They’ve pretty much pulled out all the stops already,” said Mr. Ablin of Harris Private Bank. “Now they are just waiting patiently for them to take a fuller effect in the economy.”
With all the hand-wringing, however, many investment advisers have been urging clients to ignore the recent swings.With all the hand-wringing, however, many investment advisers have been urging clients to ignore the recent swings.
Although a number of American companies stand to be hurt by any weakness in China, data out Tuesday was the latest to suggest that the economy in the United States is continuing to gain strength.Although a number of American companies stand to be hurt by any weakness in China, data out Tuesday was the latest to suggest that the economy in the United States is continuing to gain strength.
Even setting aside the problems in China, many analysts have said that highflying American stocks were due for a pause after the steady climb that has characterized the United States stock market over the last four years.
The slump in China’s stock market has come with conflicting signals from Beijing.
After a tremendous rally fizzled in June, the Chinese government resorted to exceptional measures to try to prop up share prices, including ordering state agencies to buy shares and banning large shareholders from selling. Those measures now appear to have failed.
In an apparent reflection of policy-making dissonance in Beijing, China’s state-controlled financial news outlets gave voice to a debate about future intervention in the markets.
“The slump in the stock markets is destroying what remains of investor confidence, and this problem is profoundly serious,” said a front-page commentary on Tuesday in the official Securities Daily, defending interventionist policies.
However, a rival commentary in another official news outlet, The Economic Information Daily, said that it was time for the government to step back from shoring up the stock market.
“The domestic policy focus should be on steadily retreating from stock market bailout policies,” the front-page commentary said. “Government bailouts are meant to avert financial risks, not to prop up stock prices.”