U.S. stocks closed higher Thursday, stabilizing after a steep sell-off, helped by some recovery in oil prices and comments from Fed policymakers that indicated possibility of an even more gradual pace of tightening. ( Tweet This )
The Nasdaq composite rose 2.5 percent, more than recovering from an earlier 1 percent dip.
Also supporting gains was a rally in shares of JPMorgan Chase after thebanking giant reported net income of $5.4 billion, earnings per share of $1.32, on revenue of $23.7 billion, beating estimates.
“You got good news out of JPMorgan that set the tone for the day and reminds investors it’s not the end of the world,” said Jack Ablin, chief investment officer at BMO Private Bank. He noted valuations are still on the high end.
The S&P 500 held more than 2 percent higher in afternoon trade, topping the psychologically key level of 1,900 in intraday trade as energy rose more than 5 percent to lead all sectors higher. Energy is down more than 20 percent for the last 12 months.
U.S. crude oil futures settled at $31.20 a barrel, up 72 cents, or 2.36 percent.
There’s an “ongoing bid in energy. That helps,” said Art Hogan, chief market strategist at Wunderlich Securities. He also attributed support for gains to extremely oversold conditions and more accommodative remarks from Federal Reserve policymakers.
St. Louis Federal Reserve President James Bullard said Thursday that a continued decline in inflation expectations may change his outlook for further Fed rate hikes. Bullard is a voting member of the central bank’s policymaking committee.
The Fed’s Bullard also said in his speech Thursday morning that the recent move in oil prices has been “very substantial” and has implications for monetary policy, although low oil prices are a “net positive” for the U.S. economy.
The comments followed remarks Wednesday from another voting member, Boston Fed President Eric Rosengren, that global and U.S. economic growth may be slipping and force a more gradual pace of tightening than officials currently expect.
“That’s working its way into the marketplace today. … Bullard’s commentary is very constructive for the market,” Hogan said.
Treasury yields traded mixed, with the 2-year yield lower near 0.89 percent and the 10-year yield higher at 2.10 percent. The curve, which flattened in recent sessions, steepened, not surprising given the stock rally.
The Treasury auctioned $13 billion in 30-year bonds at a high yield of 2.905 percent.
“It’s probably a contributing factor,” said John Briggs, head of strategy at RBS. “If you wanted to, you could argue the front end is moving on Bullard, but slightly.”
New York Fed President William Dudley, known to be dovish, is scheduled to speak Friday.
The U.S. dollar index traded slightly higher in afternoon trade.
The major U.S. stock indexes rallied in mid-morning trade after initially struggling to hold slight opening gains. Analysts attributed much of the advances in stocks to short-covering on firming oil prices amid talk of a moderate to hawkish Fed voting member tilting dovish.
“I think that an element of this is short covering and besides energy, some of the comments out of Fed speakers, especially Bullard, are saying (inflation could be pressured by low oil),” said Peter Cardillo, chief market economist at First Standard Financial.
Oil held higher, with both U.S. crude and Brent above $31 a barrel in afternoon trade.
“There’s a pretty good case that one can make that energy is putting in a temporary bottom,” said James Meyer, chief investment officer at Tower Bridge Advisors, noting stocks could be “setting up for a tradable rally.”
“There could be some bounces here but the markets are resetting to lower growth in 2016 and 2017 and how much lower growth that is, is still to be determined,” said Nick Raich, CEO of The Earnings Scout.
“We’re not measuring anything in this data that suggests growth is going to fall off the cliff,” he said.
In economic news, weekly jobless claims rose to 284,000. Decemberimport prices fell 1.2 percent, for a sixth-straight month of declines as the cost of petroleum and a range of other goods fell further, suggesting a tame inflation environment could persist in the near term, Reuters said.
The major U.S. averages lost more than 2 percent Wednesday and closed more than 10 percent below their 52-week intraday highs, in correction territory. On Wednesday, the S&P 500 closed below 1,900 for the first time since September.
The U.S. dollar reversed an earlier decline to trade about 0.2 percent higher against major world currencies, with the euro near $1.085 and the yen at 118.17 yen against the greenback.
Overnight, the People’s Bank of China set Thursday’s yuan mid-point rate at 6.5616, compared with Wednesday’s fix of 6.5630.
European stocks closed more than 1.5 percent lower Thursday. Asian stocks ended mostly lower, with only the Shanghai composite closing higher, up nearly 2 percent.
Minutes from the European Central Bank’s Dec. 3 meeting showed euro zone inflation could miss the bank’s already lowered forecast, but the ECB needed to keep some power dry in case conditions require further policy easing, Reuters said.
Risks, particularly from emerging markets and geopolitical turmoil, continue to weigh on euro zone growth while governments are still not doing their part in fostering growth with reforms and fiscal accommodation, the report said.
In other central bank news, the Bank of England held rates at a record low of 0.5 percent, in-line with expectations.
The S&P 500 added 31 points, or 1.66 percent, to 1,921, with energy leading all sectors higher.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 24.
About two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 619 million and a composite volume of nearly 3.1 billion in afternoon trade.
Gold futures for February delivery settled down $13.50 at $1,073.60 an ounce.
— CNBC’s Patti Domm and Reuters contributed to this report.