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After Big Losses, Markets Stage A Post-Christmas Rally

Specialist Vera Liu (left) and trader James Matthews work on the floor of the New York Stock Exchange on Wednesday. U.S. stocks are experiencing a post-Christmas rally after record-breaking losses on Monday.
Specialist Vera Liu (left) and trader James Matthews work on the floor of the New York Stock Exchange on Wednesday. U.S. stocks are experiencing a post-Christmas rally after record-breaking losses on Monday.

Updated at 1:43 p.m. ET

The stock market appears to be shaking off its recent woes. Shortly after noon Wednesday, the Standard & Poor's 500 and Dow Jones Industrial Average were up about 2 percent, although they spent the morning moving back and forth between positive and negative territory.

The tech-heavy Nasdaq was also having a good day, up 2.8 percent.

So far the holiday season has been a big disappointment for investors and traders, but many are still hoping for a Santa Claus rally that would wash away some of December's losses. Such a boost usually pushes stock prices higher in the year's final week of trading.

"For the past five decades, the final week of the year and the first couple of trading sessions in January have registered more than 1 percent gains," according to research by The Washington Post.

"Markets generally languish for a couple of weeks after Thanksgiving as traders sell investments and losers in preparation for tax season. Toward the end of December, some stocks may be on sale, causing investors to scoop them up and push indexes higher," the paper reports.

For the time being, though, it appears Santa has abandoned Wall Street. Markets reacted negatively to several events coming out of the nation's capital: the partial government shutdown, the resignation of Defense Secretary Jim Mattis and what was widely seen as a bungled response to the market turmoil by Treasury Secretary Steven Mnuchin. After meeting with the CEOs of the six largest U.S. banks, Mnuchin tweeted that banks had "ample liquidity" to meet the needs of borrowers. But instead of being reassured by the comments, markets continued to tumble. When asked Tuesday if he had confidence in Mnuchin, President Trump said he did: "Very talented, very smart person."

Concerns about a slowing global economy and the protracted trade dispute with China have not gone away. And markets are also worried that Trump's ongoing campaign against the Federal Reserve over interest rates might culminate in an effort to dismiss Fed Chairman Jerome Powell.

On Wednesday, White House economic adviser Kevin Hassett said that Trump was happy with Mnuchin's performance, telling an NBC reporterthat Powell's job is "100 percent" safe.

The final week of 2018 trading didn't get off to a good start. On Monday, the Dow logged a nearly 3 percent loss — breaking a 100-year-old record for the worst showing on Christmas Eve.

The Dow dropped to 21,792.20. Other U.S. indexes fell, too. The Nasdaq lost 2.2 percent to 6,192.92. The S&P 500 index fell 2.7 percent to 2,351.10.

Stock markets in Asia were mixed on Wednesday. Tokyo's Nikkei 225 index was up less than 1 percent, while markets in Shanghai and Hong Kong were down less than half a percent.

European markets were also mixed, with Frankfurt's DAX showing a small gain, while the FTSE 100 (London) and the CAC 40 (Paris) moved lower.

In the U.S., stocks are headed for their worst December since the Great Depression. And the words "bear market" have been on the lips of more than a few traders and analysts.

A bear market is when a stock index has fallen more than 20 percent from a recent high. The S&P 500 hit that mark Monday.

As for a Santa rally, at least one market observer is managing expectations.

"Year-end trading can be slow, as window-dressing can easily take over trades," Howard Silverblatt of S&P Dow Jones Indices told The Washington Post. "At this point the best gift Saint Nick can give us is a stable market. Gains would be a nice extra, but less volatility would help support confidence in the market, and permit longer-term investment decisions — by investors and corporate planners."
Copyright 2018 NPR. To see more, visit https://www.npr.org.