Stocks jump as Dow up more than 200, oil rises for 2nd day

December 16 00:39 2015

Stocks soared Tuesday with the Dow up more than 200 points as the price of crude oil rallied for a second day and Wall Street awaits the Federal Reserve’s decision Wednesday on interest rate hikes. Investors are also keeping an eye on the ongoing turmoil in the riskier corner of the corporate bond market. The Dow Jones industrial average was up about 235 points, or 1.4%, at midday. The blue-chip stock gauge is building on Monday’s 103-point rebound after coming off its worst week since August.stock_market_01

The broader Standard & Poor’s 500 jumped 1.4% and the Nasdaq composite gained 1.4%. Recently stocks had been hurt by a continuing plunge in U.S.-produced crude oil, which earlier Monday tumbled below $35 a barrel for the first time since the 2008 financial crisis. The swoon in oil prices has also spooked bond investors that hold high-yielding “junk bonds,” sparking a huge selloff in the so-called “junk” bond market as investors liquidate their shares in exchange traded funds and mutual funds that invest in risky debt — mainly of energy companies — to avoid the possible fallout of more defaults.

But U.S. stocks have stabilized along with U.S.-based crude. Crude rebounded and closed up about 2% Monday and is up $1.35, or 3.7%, to $37.66 Tuesday. The high-yield bond market seems more stable today, too. After drops of 2% on Friday and another 0.9% Monday, the iShares iBoxx $ High Yield Corporate Bond exchange traded fund (HYG) was up 1.8% Tuesday. “Risky assets are bouncing as oil and high-yield credit stabilize,” Cagdas Aksu of Barclays told clients in an early-morning research note. “After the wild moves in high yield spreads and oil yesterday, markets are stabilizing.” he wrote.

Investors are also gearing up for tomorrow’s Fed meeting, when the U.S. central bank is expected to hike short-term interest rates for the first time since 2006, despite the recent turbulence in financial markets. Wall Street, which widely expects a rate increase, will be closely watching what the Fed and Fed Chair Janet Yellen say about the pace of future rate hikes. The general consensus is that Yellen will reassure markets that the pace of increases in 2016 will be very slow and deliberate, a so-called dovish message that would reduce some of the angst and fallout of any rate hike tomorrow.