Dow notches record point surge in dramatic rebound

Ann Santiago
December 28, 2018

Wednesday's gains pulled the S&P 500 back somewhat from the brink of a bear market, where it finished after a shortened trading session Monday. The benchmark S&P 500 gained 5 percent or 116 points to 2,467.

Instead of pushing into bear-market territory, the Dow Jones Industrial Average and the Standard & Poor's 500 index marked their biggest single-day point increases ever.

USA stock markets have enjoyed a record-breaking run, rising steadily since March 2009, the low point of the financial crisis.

Prior to Wednesday's surge the Dow and S&P 500 were hovering just above bear market territory, with each having fallen almost 20 percent from highs reached in October and September, respectively.

"We've had times when we dropped 20 percent and went into recession but this is an example, so far, where the market realizes a recession isn't imminent, and going down 20 percent doesn't make sense", said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance.

This therefore means that NASDAQ is down by more than 20 percent from the value of 29 of august when it had recorded its high.

Weighing on sentiment was President Donald Trump's comment that he was prepared to wait as long as it takes to get funding for his US-Mexico border wall, a demand that has triggered a partial shutdown of the federal government that is now in its fifth day.

"The banks all confirmed ample liquidity is available for lending to consumer and business markets", the statement from the Treasury said. But despite evidence that the United States economy remains robust, this year could still mark the first bear market in close to a decade. A senior Treasury official told CNBC on Monday that the objective of Mnuchin's call and statement was to take a "prudent, preemptive measure" after last week's market volatility.

Santa was nowhere to be found on Wall Street this Christmas Eve.

Mnuchin tweeted that he spoke with the president. "This is a disaster for the Fed, a disaster for the president and a disaster for the economy". Two days earlier, he said "it is incredible" that "the Fed is even considering yet another interest rate hike". The market remains on track for its worst December since 1931, during the depths of the Depression, and could finish 2018 with its biggest losses in a decade. Losses in utility companies and carmakers dragged the Stoxx Europe 600 Index into the red. Oil's best rally since 2016 added to the equity surge.

Trump has repeatedly criticized the Fed, blaming the central bank for raising the rates too fast and causing market volatility.

"Yesterday was a blowout day for USA equity markets which triggered optimism that this could be a key reversal day but the upward momentum has not really followed through into Asia and Europe", said Lee Hardman, an analyst at MUFG in London. Newmont Mining was the only S&P 500 member to fall. Some traders have suggested that the market has gotten to the point where a short-term bounce could occur, if only for technical reasons. The call was a signal to the market, at least for a day, that Mnuchin perhaps knew something bad coming down the pike.

The NYSE closes early on Monday at 1 p.m. ET.

The markets were closed on Tuesday because of the Christmas holiday.

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