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Pedestrians carry umbrellas while walking past the New York Stock Exchange (NYSE) in New York, U.S., on Friday, May 6, 2016. U.S. stocks retreated a fourth day, with the S&P 500 poised for its first back-to-back weekly drop since February, after the smallest jobs gain in seven months raised doubts about the strength of the worlds largest economy.

(bloomberg)

(Bloomberg) -- U.S. stocks rebounded from a violent selloff to post the biggest rally in 15 months as investors poured back into some of the most beaten-down sectors.

Technology, materials and consumer shares paced a 1.7 percent gain in the S&P 500 Index, while DowDuPont and Home Depot led a 567 point surge in the Dow Jones Industrial Average, the biggest gain in two years. The ride wasn’t straight up, though. The Dow plunged more than 500 points at the open, adding to anxiety after Monday’s rout -- the worst in almost seven years. Stocks swung between gains and losses no fewer than a dozen times before a late-session rally.

The benchmark for U.S. share volatility went through wild gyrations after hitting a two-year high. Treasury yields swung before nudging higher. The greenback was little changed after two days of gains.

Earlier, the Stoxx Europe 600 Index slumped the most since June 2016, and Japan’s Nikkei entered a correction as most of the shares on the 1,000-plus member MSCI Asia Pacific Index declined. European bonds traded higher.

What began with rising bond yields became a selloff across global equity markets late last week, as investors feared the return of inflation and higher rates that could erode profitability for companies already trading at elevated valuations. Traders are watching how the moves unfold from here -- a sustained stock slump has the potential to undermine consumer and business sentiment, crimp borrowing and so start to curtail global growth.

“Based on where we stand relative to historic averages, there may be more pain ahead,” David Lebovitz, global market strategist at JPM Asset Management, said in a message. “However, with economic growth solid, profits rising and central banks only normalizing policy at a gradual pace, it seems reasonable to expect that we will look back on this a few months from now and not even remember what the initial plunge felt like.”

Earlier Tuesday, the Cboe Volatility Index, a gauge of implied volatility for the S&P 500 Index over the next month, breached 50 to touch its highest level since the aftermath of China’s devaluation of the yuan in 2015.

Elsewhere, oil declined and metals fell. Bitcoin traded around $7,600 after at one point sinking below $6,000 for the first time since October.

Here are some key events scheduled for this week:

  • Monetary policy decisions are due in Russia, India, Brazil, Poland, Romania, the U.K., New Zealand, Serbia, Peru and the Philippines.
  • Earnings season continues with reports from Walt Disney, SoftBank, Sanofi, Philip Morris, Tesla, Rio Tinto, L’Oreal and Twitter.
  • Dallas Fed President Robert Kaplan and New York Fed President William Dudley are among policy officials due to speak in Frankfurt and New York.

These are the main moves in markets:

Stocks

  • The S&P 500 Index gained 1.7 percent as of 4 p.m. New York time, the biggest surge in 15 months.
  • The Stoxx Europe 600 Index decreased 2.4 percent.
  • The U.K.’s FTSE 100 Index dipped 2.6 percent.
  • The MSCI Emerging Market Index sank 2.5 percent to the lowest in almost five weeks.

Currencies

  • The Bloomberg Dollar Spot Index fell less than 0.05 percent.
  • The euro climbed less than 0.05 percent to $1.2371.
  • The British pound declined 0.1 percent to $1.3949.
  • The Japanese yen declined 0.4 percent to 109.56 per dollar.

Bonds

  • The yield on 10-year Treasuries climbed nine basis points to 2.80 percent.
  • Germany’s 10-year yield declined four basis points to 0.69 percent.
  • Britain’s 10-year yield fell four basis points to 1.521 percent, the biggest fall in almost five weeks.

Commodities

  • West Texas Intermediate crude dipped 1 percent to $63.43 a barrel.
  • Gold fell 1.3 percent to $1,322.74 an ounce.
  • Copper fell 1.3 percent to $7,076 per metric ton.

Terminal users can read more on the slide in stocks in other Bloomberg stories:
Hedge Funds Now Look Prescient After Cutting Short-Vol Bets
Volatility-Targeting Funds Could Sell $225 Billion of Stocks
‘Buy the Dip’ Takes Hold at Allianz to JPMorgan as Rout Deepens
As Investors Raced to Hedge, ETF Options Trading Beat ETFs
Volatility Jump Has Traders Asking About VIX Note Poison Pill
VIX-Related ETPs Go Wild in After-Hours Trading After Rout
VIX at 38 Is Waterloo for the Beloved Short Volatility Trade

--With assistance from Adam Haigh Samuel Potter Luke Kawa Lu Wang and Julie Verhage

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net, Kailey Leinz in New York at kleinz1@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn, Todd White

©2018 Bloomberg L.P.

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