U.S. stocks roared for a second consecutive session Monday as commodity prices stabilized, a potential sign the clouds over the market are beginning to part after two bruising weeks that pushed indexes from New York to Hong Kong into correction territory.
Monday’s gains were broad, with increases seen in oil companies, regional banks and utilities firms. The trading session lacked the volatility that characterized last week’s stumble. The S&P 500 and Dow Jones Industrial Average climbed out of the gate, marched steadily higher and never reversed course. The indexes closed up 1.4% and 1.7%, respectively.
The moves marked a sharp departure from the past two weeks, when concerns over rising bond yields and collapsing bets on low volatility led investors to pull a record amount of money from equity funds in the week ended Wednesday and dump other assets, like oil and gold. In total last week, the blue-chip index changed direction 53 times, including 29 times in a single session.
The wild swings in share prices led many traders to express uncertainty over when the downturn would end.
Yet on Monday, markets showed signs of bouncing back—giving some investors hope that the turbulence that had gripped markets around the world was starting to fade.
The S&P 500 notched its biggest two-day percentage gain since June 2016, shortly after markets rebounded from U.K.’s surprise vote to leave the European Union. Commodities that had slid the past two weeks reversed course, with U.S. crude oil ending the day higher following its largest one-week percentage decline in more than two years. And a measure of expected swings in the U.S. stock market, the Cboe Volatility Index, headed lower again, after rocketing higher in its biggest weekly advance since August 2015.
“We’re off to a good start,” said Frank Cappelleri, executive director and senior equity sales trader at brokerage Instinet, who had viewed Friday’s late-session stock rebound—coming off the back of a steep pullback and several large intraday swings—with a degree of skepticism.
The Dow Jones Industrial Average jumped 410 points to 24601 on Monday, nearly erasing its losses for the year. The blue-chip index, which notched its first two-day winning streak this month, is still down 7.6% from its Jan. 26 high. The gains followed a rally that lifted shares in South Korea and China to their biggest one-day advance since January.
Still, some investors and analysts warned that the market’s attempt to rebound could be tested as early as Wednesday, when the Bureau of Labor Statistics is expected to release fresh data on consumer prices. Concerns that a faster-than-expected pickup in inflation could push the Federal Reserve to pick up its pace of interest-rate increases have pushed government bond yields higher throughout the year, with the yield on the benchmark 10-year U.S. Treasury note settling Monday at its highest level since January 2014.
Further evidence of inflation could stoke another bout of pressure on bonds and stocks, rattling the markets again after a brief period of calm.
Wednesday’s consumer-price data will be key to watch to gauge whether the January wage growth figure, which some analysts said pressured U.S. bond prices, was part of a broader trend, said Matthew Forester, chief investment officer at BNY Mellon’s Lockwood Advisors.
“How long it takes for things to calm down again is anybody’s guess,” Mr. Forester said.
On Monday, shares of energy companies rose with oil prices, giving major indexes a boost.
The S&P 500 energy sector rose 1.8%, among the biggest gains of the broad index’s 11 sectors, while U.S. crude oil rose 1.1% to $59.87 a barrel after sliding last week on worries about rising U.S. production.
Outside the equity market, demand for haven assets such as gold has been muted, while stocks and bonds in emerging markets and riskier pockets of Europe have held up well, suggesting investors remain encouraged about the global economy. Credit spreads have mostly remained tight, reflecting continued optimism about the outlook for the corporate sector.
“The reaction in [credit] spreads, for the time being, has been relatively muted because of the good fundamentals of corporate balance sheets,” said Gilles Pradère, fixed income portfolio manager at RAM Active Investments.
Earlier, stocks across Europe rallied, lifting the Stoxx Europe 600 up 1.7%.
The Shenzhen Composite, home to smaller-cap stocks in China, led gains in Asia, jumping 2.6% after coming under pressure last week. The Shanghai Composite rose 0.8%, its biggest gain since January 23.
Over the weekend, state-run media reported that the period of volatility for Chinese stocks may be over, said Ivan Ip, a stocks strategist at UOB Kay Hian. “That was taken as a cue to invest by local traders,” he added.
South Korea’s Kospi closed up 0.9%, while Hong Kong’s Hang Seng reversed gains late in the session to edge down 0.2%. Markets in Tokyo were shut for a holiday.
