Stocks bounce after steep selloff on Italy crisis
Wall Street rose on Wednesday, with gains in energy and banking stocks fueling the recovery from a steep selloff driven by Italy’s political crisis.
A renewed attempt to form a coalition government in Rome by the two anti-establishment parties, the 5-Star Movement and League, raised hopes that Europe’s third-largest economy could avoid a new election.
A surprise breakthrough to form a hung government would ease uncertainty, but still usher in a coalition planning to ramp up spending in the heavily indebted nation and push for changes to European Union and euro-zone fiscal rules.
“It’s a rebound from yesterday on hopes that there may be some agreement on forming a government. But these kind of perceptions are going to bounce back and forth,” said Scott Brown, chief economist at Raymond James in St. Petersburg.
“Markets are a little bit fragile because it’s a holiday week. That could lead to some sharp moves either way.”
At 10:04 a.m. EDT, the Dow Jones Industrial Average was up 115.15 points, or 0.47 percent, at 24,476.60, the S&P 500 was up 14.72 points, or 0.55 percent, at 2,704.58 and the Nasdaq Composite was up 34.00 points, or 0.46 percent, at 7,430.60.
The S&P 500 and the Dow on Tuesday posted their first 1 percent drop in May as investors scurried for safety assets such as US bonds on fears of political instability in Italy.
On Wednesday, 10 of the 11 major S&P sectors rose, led by a 1.5 percent gain in energy index .SPNY.
Bank stocks, which were the worst hit Tuesday, recovered with the S&P financial index rising 1.1 percent. The Federal Reserve is set to consider a proposal to modify the “Volcker Rule” at 3 p.m. ET.
The proposal, which marks another step by Trump administration regulators to ease banking rules, is aimed at preventing lenders from making market bets while accepting taxpayer-insured deposits.
The S&P technology gained 0.4 percent, boosted by a 2.1 percent jump in shares of cloud-based business software maker Salesforce.com that reported quarterly profit above estimates and lifted full-year forecast.
HP rose 2.6 percent after posting quarterly revenue above estimates and raising full-year profit forecasts.
Investors also kept a wary eye on the developments around tariffs and trade. In an unexpected change in tone, the United States said late Tuesday it could still impose tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property.
China said Wednesday it was ready to fight back if Washington was looking for a trade war, days ahead of a planned visit by US Commerce Secretary Wilbur Ross.
Advancing issues outnumbered decliners for a 4.32-to-1 ratio on the NYSE and for a 3.64-to-1 ratio on the Nasdaq.
The S&P index recorded 15 new 52-week highs and one new low, while the Nasdaq recorded 124 new highs and 10 new lows.