Wall Street gains most since 2011 to halt six-day rout, as TSX ends solidly higher

U.S. stocks rallied the most since 2011, halting a six-day rout, and the Toronto Stock Exchange was solidly higher as investors found some relief after the worst global equity rout in almost four years. Treasuries fell and the dollar rose.

In Toronto, the S&P/TSX composite also rose, shooting up 230.66 points, or 1.75 per cent, to 13,381.591 after seeing an earlier triple-digit advance evaporate into a slight loss before ramping up again in the late afternoon. The Canadian dollar, which hit 11-year lows on Tuesday, was up 0.13 of a U.S. cent at 75.06 cents US.

The Standard & Poor's 500 Index jumped 3.9 per cent amid a second day of dramatic swings in equity markets, succeeding where a rally yesterday failed in the final hours of trading. Two things that have supported U.S. stocks in the past, dovish words from the Federal Reserve and improving economic data, halted a plunge that erased US$2.2 trillion from share values.

“It's definitely a positive to see markets move higher,” said Tom Manning, chief investment officer from Boston Private Wealth, which oversees about US$9 billion in assets. “I don't know that we found the bottom. I'm not convinced we don't have more negative days to follow. We're not likely to go from extreme volatility to extreme calm overnight.”

Volatility could be seen throughout financial markets. Commodities resumed their decline following a reprieve Tuesday. Gold fell for a third day, the longest stretch in a month, while copper led industrial metals lower and crude traded below US$40 a barrel.

Earlier attempts to push equities higher fell short across the globe. The Shanghai Composite Index ended 1.3 per cent lower despite an early 4.3 per cent surge. European stocks were also whipsawed, erasing a 2.7 per cent decline only to slump again. Canadian equities erased a 1.6 per cent surge in their first half hour of trading.

“We'll have more volatility until we get more visibility,” said Jacques Porta, who helps oversee the equivalent of US$570 million as a fund manager at Ofi Gestion Privee in Paris. “The Chinese devaluation worried investors and the economic data has struggled. The potential rate increase in the U.S. also gives worry that worldwide economic growth will slow.”

Concern that Chinese policy makers may fail to prevent a hard landing in the world's second-largest economy has convulsed global markets. About US$8 trillion has been erased from the value of global equities since China's surprise devaluation of the yuan on Aug. 11 as investors weighed prospects for slowing growth and the first interest-rate increase in the U.S. in almost a decade.

The S&P 500 climbed 3.9 per cent at 4 p.m. in New York, the biggest advance since November 2011. A rally in the first few minutes of trading eroded by more than half throughout the morning, before an afternoon rebound took over. Investors yesterday saw a 2.9 per cent rally evaporate in the last hour of trading, sending the gauge plunging for a loss of 1.4 per cent.

The selloff in equities broke a calm in a stock market that had gone almost four years without a 10 per cent correction. The S&P 500 plunged 11 per cent in the six days through Tuesday, the most since the U.S. was stripped of its AAA credit rating by S&P in August 2011, and was 1 per cent away from erasing its gains since the end of 2013.

Technology companies led the gains Wednesday, with Apple Inc., Google Inc. and Intel Inc. rising at least 5 per cent. Cameron International Corp. soared 41 per cent after agreeing to be bought by Schlumberger Ltd. in a US$14.8 billion deal.

The Chicago Board Options Exchange Volatility Index slipped 17 per cent to 30.04. The measure of market turbulence known as the VIX declined for a second day after a record six-day jump sent the gauge to its highest level since October 2011.

Global stock-market turmoil has weakened the case for raising interest rates in September, Federal Reserve Bank of New York President William C. Dudley said, cautioning it's important not to overreact to short-term developments.

“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley told a news conference Wednesday at the New York Fed.

Treasuries fell, pushing 10-year yields to a one-week high, as a report showed unexpected strength in orders for durable goods while advancing stocks dimmed interest in government bonds. The benchmark U.S. 10-year note yield rose 11 basis points to 2.19 per cent.

The Bloomberg Dollar Spot Index jumped 0.7 per cent, advancing for a second day. The currency gained 1.7 per cent to US$1.1328 per euro, and 0.8 per cent versus the yen.

The Stoxx Europe 600 Index lost 1.8 per cent after declining as much as 2.7 per cent, at one point erasing all those losses before tumbling again.
The Shanghai Composite swung during the day, sliding as much as 3.9 per cent, then rallying 4.3 per cent, before closing down 1.3 per cent. Hong Kong's Hang Seng China Enterprises Index also erased earlier gains, falling 0.9 per cent.

Chinese equities have lost half their value since mid-June, as margin traders closed out bullish bets. The government has halted intervention in the equity market this week as policy makers debate the merits of an unprecedented rescue, according to people familiar with the situation.

The MSCI Emerging Markets Index was little changed, after rallying 2.2 per cent on Tuesday, the most in two years. Equity gauges in India, and Saudi Arabia and South Africa lost more than 1 per cent. South Korea's Kospi jumped 2.6 per cent, capping the biggest two-day rally since June 2013, as tensions between North and South Korea eased.

The Bloomberg Commodity Index retreated 1.3 per cent. Copper fell 2.6 per cent and gold lost 1.2 per cent to US$1,124.60 an ounce.

West Texas Intermediate fell 1.8 per cent to US$38.60 a barrel, having earlier risen as much as 1.4 per cent. Rising U.S. fuel stockpiles and further declines in China's stock market fanned concern that demand may slow while global crude markets remain oversupplied.