ASX poised to rebound after Wall Street surges in late trade

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This was published 6 years ago

ASX poised to rebound after Wall Street surges in late trade

Updated

US stocks posted sharp gains in another wild trading session on Tuesday, as indices rebounded from the biggest one-day drops for the S&P 500 and the Dow in more than six years that stalled the market's record run.

Stocks swung from negative to positive after indices started the session 2 per cent lower, underscoring a return of volatility to a market that until recently was marked by an absence of major shifts. The Dow had a more than 1,100-point difference between its high and low on Tuesday.

The sharp declines in recent days marked a pullback that had been long awaited by investors after the market minted record high after record high in a relatively calm ascent.

Locally, the Australian sharemarket is poised to open sharply higher on Wednesday, with futures pointing to a 95 point, or 1.7 per cent gain, at the open.

The Dow had a more than 1,100-point difference between its high and low on Tuesday.

The Dow had a more than 1,100-point difference between its high and low on Tuesday.Credit: RICHARD DREW

"Despite violent moves in the last couple days in the market, fundamentals in the economy are very strong and it's not just the US, it's throughout the global economy," said Alicia Levine, head of global investment strategy at BNY Mellon Investment Management in New York.

The Dow Jones Industrial Average rose 567.02 points, or 2.33 percent, to 24,912.77, the S&P 500 gained 46.2 points, or 1.74 percent, to 2,695.14 and the Nasdaq Composite added 148.36 points, or 2.13 percent, to 7,115.88.

Technology, materials and consumer discretionary were the top-performing sectors on Tuesday. Defensive sectors utilities and real estate were the only major S&P groups to end negative.

In Europe - where markets opened earlier - stocks fell heavily across the board, with London's FTSE (-2.4 per cent), Paris's CAC (-2.6 per cent) in Paris and Germany's DAX (-2.3 per cent) all recording steep losses.

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The record falls reverberated around the world including Tokyo, where shares tumbled on Tuesday for another wild day.

The record falls reverberated around the world including Tokyo, where shares tumbled on Tuesday for another wild day. Credit: SHIZUO KAMBAYASHI

"Put your seatbelts on. It's going to be a volatile ride for the next several trading sessions," said Chad Morganlander, portfolio manager at Washington Crossing Advisors in New Jersey.

"Fundamentals are moving forward in a positive way, which gives us confidence that in the long run you'll continue to see higher highs within the markets."

"It's been a crazy period and today the market is probably just trying to find some footing," said John Lynch, chief investment strategist at LPL Financial.

Sharp falls, including Wall Street's drop of more than 4 per cent on Monday, have come despite generally positive economic news around the world. There is strong growth on every continent, interest rates are at or near record lows, and the US has just passed a sweeping tax overhaul that will significantly lower corporate taxes. President Donald Trump has touted seemingly unending stock market highs as proof of improved economic prospects.

But those positive factors have also, in part, created the circumstances for the recent sell-off. Accelerating growth means central banks are gradually looking to take away economic stimulus, and rising interest rates could eat into corporate profits. Workers, meanwhile, are increasingly demanding their share through wage increases.

The declines were made worse by panic that stock values had peaked, that a correction was underway, and that investors would suffer even bigger losses if they waited too long to dump their holdings.

While Trump has regularly pointed to increasing share prices as a sign of a strengthening economy, Vice President Mike Pence dismissed the latest falls on Wednesday as simply representing "the ebb and flow" of stock markets.

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Pence, who was speaking to reporters as he headed to Asia, said that the US economy remained strong, pointing in particular to record-low unemployment and signs of accelerating wage growth.

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