Stocks rebound as Dow jumps 209 points
After the previous session's shellacking, stocks moved solidly in the black Monday, powered by better-than-expected earnings reports and more stimulus from China's central bank.
The Dow Jones industrial average jumped 208.63 points, or 1.2%, to close at 18,034.93.
The Standard & Poor's 500 index gained 19.22 points, or 0.9%, to 2100.40 and the Nasdaq composite index rose 62.79 points, or 1.3%, to 4994.60.
On Friday, the Dow Jones industrial average plunged 280 points to 17,826.30, leaving it up just 3 points on the year. Friday's selloff was fueled by renewed fears of a Greek exit from the eurozone, moves by Chinese stock regulators to reduce stock purchases financed with borrowed cash and a move higher in U.S. inflation at the consumer level, which sparked fears of an earlier-than-expected rate interest hike from the Federal Reserve.
So what changed from Friday?
1. China's move to spur lending.
The Chinese central bank lowered the amount of money banks need to keep in reserve by 1 percentage point, a move designed to spur economic growth there by freeing up more cash that could be used by banks to lend to small and mid-sized businesses. The latest round of stimulus measures offset some of the negative from regulators moves Friday to quell speculation in the Chinese stock market.
"After last week's horrific ending, the Dow is set to jump to an early lead, thanks to an effort by the People's Bank of China (PBoC) to add liquidity to the market," Josh Selway, an analyst at Schaeffer's Investment Research told clients before the start of trading.
2. Earnings beats soothe nerves. Toy maker Hasbro (HAS), investment bank Morgan Stanley (MS) and oil services company Halliburton (HAL) all topped first-quarter profit estimates before the opening bell, allowing investors to shift their attention to the better-than-expected earnings season.
And while negotiations between Greece and its European creditors are still ongoing and appear to be at a stalemate, investors opted to overlook that issue for the time being. Still, the risk of a Greek exit from the eurozone remains a risk, as does the possibility of it defaulting on its debt obligations.Heading into Monday's trading, 75% of the companies that have reported earnings for the January-through-March quarter have topped forecasts, above the longer-term average of 63%.
"While we maintain our baseline of a muddle-through scenario, we consider that the risk of an accident has increased as both sides reportedly stand firm on their positions, and the Greek government's cash position is close to zero," Barclays warned clients in an early-morning research note.