- The Washington Times - Tuesday, February 6, 2018

The stock market came roaring back Tuesday in busy trading, reversing deep losses from the previous two trading days and raising hopes of halting a global sell-off as the White House affirmed the underlying strength of the U.S. economy.

A day after U.S. markets sustained their biggest decline since 2011, the Dow Jones industrial average gained 567 points, or more than 2.3 percent, to close at 24,912. The index went through wild swings of nearly 1,000 points in positive and negative territory throughout the day before picking up in afternoon trading to erase just over half of Monday’s losses.

The broader Standard & Poor’s 500 index rose 46.20 points, or 1.7 percent, to 2,965.14. The tech-heavy Nasdaq composite rose 148.36 points, or 2.1 percent, to 7,115.88.

The rally gave investors — and policymakers in Washington — a measure of relief after two days of panicky sell-offs. The stock market’s big declines began last week when government data showed a faster-than-expected pickup in wages, sparking inflation fears and worries that the Federal Reserve could raise interest rates more quickly than had been forecast.

The deep losses also proved a political problem for President Trump, who routinely pointed to the strong bull market on Wall Street since his election as proof of the soundness of his economic and deregulatory agenda.

On Tuesday, U.S. investors appeared inclined to view the economic news in a more favorable light. White House officials and many financial analysts said the fundamentals of the economy are sound, with a low unemployment rate, strong corporate earnings and the expected impact of recent tax cuts.

“The economy is incredibly strong right now,” said White House press secretary Sarah Huckabee Sanders. “There’s nothing that’s taken place over the last couple of days in our economy that’s fundamentally different than it was two weeks ago. And we’re very comfortable with where we are right now.”

Vice President Mike Pence said the steep drop in the stock market on Monday was probably just part of normal fluctuations on Wall Street.

Monday’s sell-off “represents what is, very likely, simply the ebb and flow of our stock markets, and we recognize that,” Mr. Pence told reporters in Alaska on his way to leading a U.S. delegation at the Winter Olympics in South Korea.

“The most important numbers to focus on are the fundamentals,” Mr. Pence said. “And the fundamentals of this economy continue to be very strong.”

Some analysts suspected the role of computer-driven algorithmic trading rather than investor pessimism in the precipitous declines. The market crossed briefly Tuesday into “correction” territory — a 10 percent drop in value — before rallying strongly. Even with the rebound, the S&P 500 was down 6.2 percent from the record high it set on Jan. 26.

Analysts cautioned that the U.S. market’s unprecedented seven-year bull market run was bound to lose steam and that the gyrations of the equity markets are not immediately and directly mirrored in the real economy.

“If investors look at underlying earnings growth and the fundamentals of the global economy, there is reason for optimism,” said Neil Wilson, senior market analyst at ETX Capital.

Treasury Secretary Steven T. Mnuchin said automated trading programs might have been partly responsible for the stock market’s volatility.

“I have heard from others that it has played a role. As there’s more programmed trading, this tends to have volatility in both directions,” Mr. Mnuchin said.

Mr. Mnuchin also said the U.S. government’s plan to borrow what is expected to be more than $1 trillion this year isn’t contributing to volatility in markets.

“I don’t think that’s had an impact on the market at the moment,” he told reporters at the Capitol. “The debt markets are one of the most liquid markets in the world and are reacting very well.”

The Treasury Department said last week that the U.S. would boost note and bond sales this year for the first time since 2009 to finance rising budget deficits, fueled in part by the tax cuts that Mr. Trump signed into law in December.

The president remained mum about the markets for a second straight day. But asked by a reporter if the president regretted taking credit for the soaring markets, Mrs. Sanders scoffed.

“Does the president have second thoughts about taking credit for a booming economy? Absolutely not,” she said.

Major indexes in Asia and Europe tumbled after Monday’s 1,150-point drop in the Dow. Among the biggest losers Tuesday was Tokyo’s Nikkei 225 stock average, which ended 4.7 percent lower. Hong Kong’s Hang Seng skidded 5.1 percent, and South Korea’s Kospi declined 1.5 percent.

In Europe, the British FTSE 100 index fell 2.4 percent. The CAC 40 in France fell 2.8 percent, and Germany’s DAX was down 2.7 percent.

David R. Sands contributed to this article, which is based in part on wire service reports.

• Dave Boyer can be reached at dboyer@washingtontimes.com.

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