North American stock markets sustained a day-long rally to close up sharply on Thursday, putting steep declines taken earlier this week in the rearview mirror, for now.
The S&P TSX composite index of Canadian shares closed 385.1 points higher, or 2.88 per cent, to 13,763.6. In New York, the Dow Jones industrial average ended the session up 369.3 points (2.27 per cent) higher while the S&P 500 finished up 47.1 points (2.43 per cent).
The stock market is rebounding from a sharp six-day slump that was triggered by concerns about the health of the Chinese economy.
Traders were encouraged by a surge in the Chinese stock market as the nation’s main index logged its biggest gain in eight weeks. In the U.S., a report showed that the economy expanded at a much faster pace than previously estimated in the second quarter.
Energy stocks were among the biggest gainers as oil surged 9 per cent, trading back above $40 a barrel.
MORE: Oil prices stage biggest one-day jump in more than six years
U.S. stocks are rising for a second day after logging their best performance in almost four years Wednesday, as the market bounced back from its six-day slump. The rebound helped push the Nasdaq composite back into positive territory for the week.
“It looks to be more buying on depressed valuations,” said Tim Dreiling, senior portfolio manager at U.S. Bank Private Client Reserve. “Capital comes back in, finding valuations to be more favourable than a week ago.”
Financial markets have been volatile since China decided to weaken its currency earlier this month, a move investors interpreted as an attempt to bolster a sagging economy. Traders are also jittery about the outlook for interest rates. The U.S. Federal Reserve has signalled it could raise its key interest rate for the first time in nearly a decade later this year.
William Dudley, president of the New York Federal Reserve Bank, said Wednesday that the case for a U.S. interest rate hike in September is “less compelling” given China’s troubles, falling oil prices and emerging markets weakness.
Given those headwinds, investors worry the economy could falter if the Fed raises rates too soon, chocking economic growth.
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