U.S. Stocks Rally After Opening-Day Rout While Oil Resumes Slide

(Bloomberg) -- U.S. stocks staged an afternoon comeback in a bid to rebound from their worst start to a year since 2001 after China intervened to stabilize its financial markets. The euro slumped to its lowest point in a month and American oil slid below $36 a barrel.

The Standard & Poor’s 500 Index erased an earlier decline to end Tuesday up 0.2 percent as telephone companies and utilities rallied. Apple Inc., the world’s most valuable company, fell to its lowest level since October on a report that it may reduce production of an iPhone model. Emerging-market shares meandered after Monday’s slump, while signs of disinflation in Europe sent the euro lower versus the dollar for a fourth day.

“What people are looking at are the big three -- global growth, especially Chinese growth, the impact of energy and a Fed that’s now in play,” Stephen Wood, who helps manage $237 billion as chief market strategist for North America at Russell Investments in New York, said by phone. “In a volatile environment like this we’re seeing markets being slightly positive, but not very, for this year. Doing your homework becomes more important than in any other environment.”

Chinese government funds propped up share prices Tuesday, according to people familiar with the matter who asked not to be identified as the buying wasn’t publicly disclosed, stabilizing the nation’s markets after slowing factory growth sparked a 7 percent rout Monday. The move eased concern that weakness in the world’s second-largest economy will hamper global growth. Crude’s decline added to worries that stagnant prices in Europe will linger at the same time the Federal Reserve tightens monetary policy.

Stocks

The S&P 500 rose to 2,016.71 as of 4 p.m. in New York, after slipping 1.5 percent in the previous session. The Dow Jones Industrial Average climbed 0.1 percent, with Apple down 2.5 percent after Japan’s Nikkei Asian Review reported the company would cut output of its latest iPhones by about 30 percent in the first quarter of 2016. S&P 500 energy shares erased a loss of as much as 1.2 percent to end up 0.5 percent.

Investors sought bargains in Europe and the U.S. after the 2.1 percent slide in global stocks Monday, which saw Europe’s benchmark index post its worst-ever inaugural session. Bank and technology shares that bore the brunt of selling last session were little changed in Europe Tuesday.

“Overall yesterday wasn’t too bad and may have even been an overreaction,” Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey, said by phone. “We’ve been through this before with China -- they’re in the process of changing their economy, you’re going to have ups and downs with that and it’s going to keep happening.”

The Stoxx Europe 600 Index rose 0.6 percent as basic resources producers surged 1.8 percent to pace gains. Germany’s DAX Index rose 0.3 percent after its slide Monday that was the biggest since a summer rout triggered by China’s devaluation of the yuan.

Shares in Asia declined, though losses were relatively small compared with Monday’s retreat. Japan’s Topix index slipped 0.3 percent and the Hang Seng Index in Hong Kong lost 0.7 percent. The MSCI Asia Pacific Index dropped 0.3 percent.

Commodities

Oil dropped to a two-week low on speculation that government data Wednesday will show U.S. crude inventories climbed last week. West Texas Intermediate oil for February delivery fell 2.2 percent to $35.97 a barrel in New York, while Brent was down 2.1 percent to $36.42.

Crude capped the biggest two-year loss on record in 2015 as ample American stockpiles sustained a supply glut and the Organization of Petroleum Exporting Countries effectively abandoned production limits.

Gold advanced a second day at the start of a month that’s been the strongest for the metal in recent years. Bullion rose on Tuesday as tensions in the Middle East and Monday’s selloff in global stock markets continued to spur haven demand.

Copper futures climbed 0.8 percent, while nickel rallied 0.2 percent in London. The LME Index of six base metals sank the most since Sept. 22 on Monday after data showed weaker factory activity in both China and the U.S., the world’s two biggest metals consumers.

Emerging Markets

The MSCI Emerging Markets Index rose 0.1 percent after sliding 3.3 percent on Monday to a six-year low, even as benchmark stock gauges in South Korea, Indonesia and Malaysia gained at least 0.6 percent.

Brazilian stocks rose for the first time in almost two weeks as valuations tumbled after the Ibovespa hit a six-year low on Monday.

Currencies

Lingering demand for safer assets ensured the yen was the best performing Group-of-10 currency Tuesday, while the euro dropped as data showed euro-area inflation was weaker than economists predicted in December, when the European Central Bank stepped up its stimulus program. The 19-member common currency declined 0.8 percent to $1.0749, falling versus most major peers.

Argentina’s peso tumbled the most since President Mauricio Macri allowed the currency to float freely as a slowdown in grain sales trimmed dollar flows into the country just as importers’ demand for foreign currency picked up.

Bonds

Yields on 10-year Treasury notes were little changed at 2.24 percent following Monday’s three basis-point decline. BlackRock, the world’s largest asset manager, warned bonds will “struggle” this year as the Fed raises interest rates.

“We also expect bonds to continue to struggle as interest rates drift higher on the back of Federal Reserve tightening and some stabilization in inflation expectations,” Russ Koesterich, global chief investment strategist for New York-based BlackRock, wrote in a report Monday. The company has $4.5 trillion in assets.

--With assistance from Stephen Kirkland, Lucy Meakin, Oliver Renick, Eddie van der Walt, Mark Shenk, Wes Goodman, Rachel Evans and Emma O'Brien.

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net; Dani Burger in New York at dburger7@bloomberg.net To contact the editors responsible for this story: Emma O'Brien at eobrien6@bloomberg.net; Jeremy Herron at jherron8@bloomberg.net David Goodman