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Wall Street reverses, ends higher in late session rally

EconomyJan 24, 2022 06:16PM ET
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© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 21, 2022. REUTERS/Brendan McDermid

By Stephen Culp

NEW YORK (Reuters) - Wall Street bounced back from a steep sell-off late in the session to close higher on Monday, with bargain hunters pushing the indexes into positive territory by closing bell.

The S&P 500 earlier came close to confirming a correction by appearing on track to close more than 10% down from its most recent all-time high reached on Jan 3 as investors focused on concerns about an increasingly hawkish Federal Reserve and geopolitical tensions.

The S&P 500 recovered 4.3 percentage points from its session low to it closing level, the largest such swing since March 26, 2020, when Wall Street was bouncing back from the global slump caused by the coronavirus pandemic.

Earlier in the day, the indexes were all more than 2% lower. The S&P appeared to be on course to confirm a correction, and the Russell 2000 looked as if it would confirm it was in a bear market.

This abrupt, late-session U-turn came in the wake of S&P 500 and the Nasdaq suffering their largest weekly percentage plunge since March 2020, when shutdowns to contain the pandemic sent the economy spiraling into its steepest and most abrupt recession on record.

"Correction territory is often a psychological sweet spot for investors. They see the correction, and they see that it's a healthy part of the markets," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

"When everything started selling off, that got a lot of people's attention, so I think we had what I would call intraday capitulation, getting some of this easy money out of the market," Dollarhide added.

The U.S. Federal Reserve is due to convene its two-day monetary policy meeting on Tuesday, and market participants will be parsing its concluding statement and Chairman Jerome Powell's subsequent Q&A session for clues as to the central bank's timeline for hiking key interest rates to combat inflation.

"I think investors are over-assuming a very hawkish stance by the Fed," said Sam Stovall, chief investment strategist of CFRA Research in New York. "Granted, inflation is high and is likely to get higher before it starts to decline. Specifically we see the headline CPI topping at 7.3% for both January and February, but then coming down to 3.5% by year-end."

In a sign that geopolitical tensions are heating up, NATO announced it was putting forces on standby to prepare for a potential Russian invasion of Ukraine.

The threat of potential conflict in that region helped U.S. Treasury yields dip, pausing their recent upward climb, which has pressured stocks in recent months.

The Dow Jones Industrial Average rose 99.13 points, or 0.29%, to 34,364.5, the S&P 500 gained 12.19 points, or 0.28%, to 4,410.13 and the Nasdaq Composite added 86.21 points, or 0.63%, to 13,855.13.

All 11 major sectors of the S&P 500 spent most of the trading day deep in red territory, but by market close all but three were green. Consumer discretionary enjoyed the largest percentage gain.

Fourth-quarter reporting season is in full swing, with 65 of the companies in the S&P 500 having posted results. Of those, 77% have come in above expectations, according to data from Refinitiv.

On aggregate, analysts now see S&P 500 annual EPS growth of 23.7%, per Refinitiv.

A series of disappointing earnings from big banks and, notably, lockdown darling Netflix Inc (NASDAQ:NFLX) have overshadowed many better-than-expected results.

Shares of International Business Machines (NYSE:IBM) gained more than 6% in after-hours trading after the company beat revenue expectations on the strength of its cloud and consulting businesses.

Kohl's Corp (NYSE:KSS) surged after Reuters reported private equity firm Sycamore Partners is preparing to make a bid for the department store chain days after a consortium backed by activist investment firm Starboard Value proposed a buyout.

Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.08-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 31 new lows; the Nasdaq Composite recorded four new highs and 1,319 new lows.

Volume on U.S. exchanges was 18.42 billion shares, compared with the 10.95 billion average over the last 20 trading days.

Wall Street reverses, ends higher in late session rally
 

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Comments (34)
Chris Hall
Chris Hall Jan 24, 2022 8:15PM ET
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Fake Ponzi Scheme
Charles Sturrock
Charles Sturrock Jan 24, 2022 6:25PM ET
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Good thing the Fed's PPT got in there when they did, or this would have been a disaster today. Oh well. They just postponed the inevitable. This mess has got to correct, and it's going to correct. If you're going to try and catch that falling knife, better be wearing some heavy gloves.
Ma Pr
Ma Pr Jan 24, 2022 5:17PM ET
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Buy low … stay high !!!
Casador Del Oso
Casador Del Oso Jan 24, 2022 4:24PM ET
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danger...extreme volatility
peter neal
peter neal Jan 24, 2022 4:22PM ET
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It bounced a lot in 1929 before it collapsed. Same thing here. It's going down to stay for a long time.
Ron Love
Ron Love Jan 24, 2022 4:22PM ET
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Well, financial collapses happen in stages. We aren’t entering a financial collapse, this is a Fed temper tantrum and the economy is extremely strong.
Alberto Vianello
Alberto Vianello Jan 24, 2022 4:22PM ET
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I'm not sure comparing 1929 to 2022 is fair nor correct.
Adam Paine
Adam Paine Jan 24, 2022 4:22PM ET
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9 Trillion on the balance sheets, unemployment creeping back up, record credit card debt, record margin use and run away inflation seems like stages of a financial collapse waiting to happen. our economy is starting to show weakness as the stimulus wares off.
Marek Wolański
Marek Wolański Jan 24, 2022 3:49PM ET
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What the heck have happened today
Ronald Warren
Ronald Warren Jan 24, 2022 3:49PM ET
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A repeat of two weeks ago on Monday when shorters got their faces ripped off. Proceed with caution!!
Al Ose
Al Ose Jan 24, 2022 2:03PM ET
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4200 SP friday close
Mitchel Pioneer
Mitchel Pioneer Jan 24, 2022 1:57PM ET
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The magic show is in full form today, as 50% of the loss miraculously disappears.  What's next for the greatest financial fraud in history, and laughingstock of the investing world?  Green by the close?
Matt Kay
Matt Kay Jan 24, 2022 1:49PM ET
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4% my behind! it rallied 2% for no reason. Did putin pass? Nahh,,, just a typical US manipulation...
Mitchel Pioneer
Mitchel Pioneer Jan 24, 2022 1:40PM ET
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The Wall Street criminals flagrantly draw a line in the sand for the losses, as the fraud continues in the biggest investment JOKE in the world.
Paulo Fernandes
Paulo Fernandes Jan 24, 2022 1:40PM ET
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Why do you complain ? If you know the game , just play it
Charles Sturrock
Charles Sturrock Jan 24, 2022 1:40PM ET
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Paulo Fernandes  Because the "game" is wrecking our economy.
 
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