Wall Street is finally taking a break from panic mode.
U.S. stocks posted modest gains on Friday as China’s stock market stopped crashing and actually gained ground. Confidence was also boosted by a strong U.S. jobs report and crude oil prices stabilized.
The Dow rose 50 points, the S&P 500 advanced 0.4% and Nasdaq gained 0.7%.
The gains come after U.S. stocks posted their worst four-day start to a year on record for the Dow, which was down more than 5% through Thursday’s close. It was also the bleakest start to a year for the Nasdaq since 2000.
“Our inaugural 2016 selloff may have climaxed yesterday,” Peter Kenny, independent market strategist and founder of Kenny’s Commentary, wrote in a note. “Given the extreme risk-off nature of our first four days of trading this year, bargain hunters may be enticed to step into the market.”
Global stocks continue to take their cues from China, which managed to pull back from the brink. The benchmark Shanghai Composite closed 2% higher on Friday.
That’s a relief because Chinese stocks started the year with an epic 12% nosedive. The selling earlier in the week triggered “circuit breakers” that are designed to smooth volatility in the markets. Trading was halted twice this week — on Thursday, the stock markets shut down after just a half hour of trading.
Sentiment was boosted after regulators scrapped the circuit breakers because many believe they were fueling sharp trading losses — rather than taming them.
Investors also cheered as China stopped allowing its currency to lose value. In fact, China’s central bank raised its target rate for the yuan for the first time in over a week. The surprise decline in the yuan has raised fears of a currency war of competitive devaluations.
Wall Street initially responded favorably to the latest evidence that the U.S. economy continues to chug along despite the global turmoil. The government said the U.S. added 292,000 jobs in December, easily beating expectations. It capped off the second-strongest year of employment gains since 1999. Importantly, wages went up 2.5% last month, matching the best gain in six years.
It also helps that crude oil has finally calmed down a bit, just a day after the commodity plummeted to the lowest level since late 2013. Oil was recently trading up slightly to $33.30 a barrel.
Gold also took a breather. The yellow metal, which tends to rise during times of fear, dropped about 0.5% to about $1,102 an ounce.