Stocks pare gains but still up after 2-week rout

January 20 00:53 2016

U.S. stocks, still reeling from its worst yearly start ever, rose Tuesday and are setting up for a bounce after China’s 2015 economic growth came in at its lowest level in 25 years but was not as bad as feared. Wall Street is hoping the gains hold, following Friday’s brutal sell-off which left the Dow Jones industrial average down 8.3% for the year and off 12.7% from its May all-time closing high.1215-stock-market_full_600

At 12:30 pm. ET, the Dow — which was up nearly 184 points earlier — was up 65 points, or 0.4%. The broad Standard & Poor’s 500, which had been up 1.1%, had also pared its gains and was 0.3% higher and the Nasdaq composite was up about 0.1% after an early rally briefly fizzled and pushed the tech-packed index into the red. Market pros remained cautious despite the relief rally early Tuesday.

Even though the stock market is extremely oversold — only 11% of companies in the Standard & Poor’s 500 stock index are above their short-term 50-day trendline — and due for a short-term bounce, there’s still a sense on Wall Street that the recent corrective action in the U.S. stock market has yet to fully play out. “The market is likely oversold enough to bounce in the near-term, but it’s a bounce in a downtrend,” Chris Verrone, an analyst at Strategas Research Partners, told clients in a research note before Tuesday’s opening bell.

“The character of any bounce,” Verrone added, “will be important to evaluate, but the burden of proof remains squarely on the bulls at this stage.” Also giving stocks a boost were earnings beats from Wall Street banks Morgan Stanley (MS) and Bank of America (BAC), which both topped lowered earnings-per-share projections. While China reported full-year 2015 at 6.9% — its slowest growth pace since 1990 — and said growth in the final quarter of last year came in at 6.8%, it was viewed by Wall Street as not as bad as it could have been, despite the fact that growth in both periods came in slightly below expectations. Global investors also latched on to hopes that China would offer up fresh stimulus to get its economy going again. Chinese stocks rose as the Shanghai composite index jumped 3.2% to close at 3007.74.