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Stock Market Rebound Falls Apart in Late Afternoon Stock Market Rebound Falls Apart as Indexes Reverse Early Gains
(about 1 hour later)
■ American markets lost big gains made earlier in the day and finished Tuesday in the red.■ 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, 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.■ 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 bounced back, despite concerns about oversupply.■ The international and American oil benchmarks bounced back, despite concerns about oversupply.
A strong rally in the stock market faded rapidly on Tuesday afternoon, killing hopes for an end to the recent turmoil in the markets.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 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 Standard & Poor’s 500-stock index ended the day down 1.4 percent, to 1,867.62, after earlier rising almost 3 percent from Monday’s close. The Dow Jones industrial average finished 1.3 percent lower, off 205 points, at 15,666.44.
Tech stocks also fell after climbing earlier in the day, with the Nasdaq finishing 0.4 percent lower, to 4,506.49. It was a huge reversal for the markets, as the Dow was up as much as 441 points in the morning. Tech stocks also fell after climbing earlier in the day, with the Nasdaq finishing 0.4 percent lower, to 4,506.49.
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. Despite the turmoil, investors were reminded of the continuing strength of the American economy by new data out on Tuesday morning showing that consumer confidence rose in August and that new-home sales rose in July. That helped support a market rally for much of the day.
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. And certain segments of the market fared better. Oil prices recovered, with futures on the New York Mercantile Exchange rising 3 percent to settle at $39.31 a barrel.
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. Investors in search of safe havens also did not drive up the prices of Treasury prices on Tuesday. The yield on the benchmark 10-year Treasury note rose to 2.07 percent, after briefly falling as low as 1.90 percent during the worst of Monday’s rout.
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. But the quick reversal in American stock indexes late in the afternoon on Tuesday brought into question whether the recovery that seemed to be building earlier in the day would have any staying power.
“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.” “Clearly this is an unstable market,” said Tim Ghriskey, the chief investment officer at Solaris Group. “There’s a lot of volatility here, so there is going to be instability.”
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. During the optimistic morning of trading in the United States, European stock markets posted strong gains, making up most of the losses suffered Monday.
The markets in China, however, posted deep losses again on Tuesday, with Shanghai stocks down 7.6 percent on the heels of 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, and emerging markets like India faring better.
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. 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.
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.
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 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.