Market Wrap: Stocks End Worst Quarter in 4 Years With Rally

Stocks Drop Sharply On Economic Data From China
Andrew Burton/Getty Images

By Sinead Carew

NEW YORK -- U.S. stocks closed sharply higher Wednesday as investors sought bargains among beaten-down stocks and the recently battered biotechnology index bounced back on the last day of Wall Street's worst quarter since 2011.

For much of the third quarter, global markets were rocked by fears of slowing growth in China and uncertainty over timing for a U.S. Federal Reserve hike of interest rates. Biotech had a seven-day sell-off kicked off by drug price regulation worries.

%VIRTUAL-pullquote-I don't think there was a specific piece of news driving the market today. We got very oversold.%"I don't think there was a specific piece of news driving the market today. We got very oversold," said Brian Fenske, head of sales trading at ITG in New York. "When everybody gets bearish quickly, you tend to get these bounces."

Investment strategists and traders said it was too soon to expect Wednesday's rally to be sustainable. However, instead of trying to bet on the rate hike timing, Fenske said that investors will now focus on economic data and look ahead to the third-quarter earnings season, which begins next week.

The Dow Jones industrial average (^DJI) rose 235.57 points, or 1.5 percent, to 16,284.7, the Standard & Poor's 500 index (^GSPC) gained 35.94 points, or 1.9 percent, to 1,920.03, and the Nasdaq composite (^IXIC) added 102.84 points, or 2.3 percent, to 4,620.17.

For the quarter, the Dow fell 7.6 percent, the S&P lost 6.9 percent and Nasdaq fell 7.4 percent. For September, the Dow fell 1.5 percent while the S&P dropped 2.6 percent and Nasdaq fell 3.3 percent.

Trading was heavy Wednesday with 8.52 billion shares changing hands on U.S. exchanges, above the 7.28 billion average for the previous 20 sessions, according to Thomson Reuters (TRI) data.

Economic Concerns

The Fed has said it needs to see more improvement in the labor market and be confident that inflation will increase before raising rates for the first time since 2006. Inflation remains below the Fed's 2 percent target.

Yellen said last week the central bank remained on track to raise rates this year. The Fed meets next on Oct. 27-28.

Data released Wednesday showed the U.S. private sector added more jobs than expected in September, raising hopes for a strong reading in the government's payrolls report due Friday.

All 10 S&P sectors were higher, with the consumer discretionary index's 2.7 percent rise leading the gains. The Nasdaq biotechnology index closed up 4.5 percent as investors sought bargains in the sector, but was still down 11.5 percent for the month after Democratic presidential candidate Hillary Clinton criticized drug pricing last week.

Although the market's recent rout has forced many strategists to slash expectations, a Reuters poll showed the S&P 500 is expected to end 2015 roughly 11 percent above current levels.

Advancing issues outnumbered declining ones on the NYSE by 2,340 to 758, for a 3.09-to-1 ratio; on the Nasdaq, 2,063 issues rose and 783 fell for a 2.63-to-1 ratio favoring advancers. The S&P 500 posted 3 new 52-week highs and 18 new lows; the Nasdaq recorded 22 new highs and 179 new lows.

-Abhiram Nandakumar and Tanya Agrawal contributed reporting.

What to watch Thursday:

  • The Labor Department releases weekly jobless claims at 8:30 a.m. Eastern time.

  • At 10 a.m., the Institute for Supply Management releases its manufacturing index for September; the Commerce Department releases construction spending for August; and Freddie Mac releases weekly mortgage rates.

  • McCormick & Co. (MKC) and Micron Technology (MU) report quarterly financial results.

Originally published