U.S. equities moved higher on Wednesday to put a nice spit shine on what was a terrible third quarter for stocks. The Dow Jones Industrial Average gained 1.5%, the S&P 500 Index went up 1.9%, the Nasdaq Composite bounced 2.3% and the Russell 2000 experienced a 1.6% jump.
The rebound was nice, but it couldn’t undo the price damage that was done over the last three months in which the Dow Jones lost 7.6% — down nearly 1,600 points for the quarter — while the Russell 2000 dropped a stomach-churning 12.2%. Which also resulted in the second consecutive monthly loss for the major averages.
And it represented the third quarterly loss for the Dow Jones — the worst result since the financial crisis, and the second-worst run since 1978.
Treasury bonds rallied along with the U.S. dollar.
Traders seemed to be spurred on by weaker-than-expected industrial production data out of Japan overnight, which led JPMorgan analysts to raise the prospect of further monetary policy easing from the Bank of Japan at its Oct. 30 meeting. They had previously expected the BoJ to wait until early 2016 before taking additional action.
In Europe, a drop in headline inflation back toward negative territory raised the prospect of more easing from the European Central Bank. Analysts at Standard & Poor’s believe the ECB will extend its bond buying program beyond September 2016, likely through the middle of 2018. The overall size of the program is expected to reach 2.4 trillion euros, more than double the original announcement.
Over in China, policymakers lowered the mortgage down payment requirement for first-time homebuyers in some cities, while cutting the tax on passenger-vehicle purchases.
And finally, after the close, the House of Representatives passed a short-term funding bill — removing the threat of a government shutdown on Oct. 1.
While back in securities, consumer discretionary stocks led the way with a 2.7% gain. But that wasn’t any help to GAP Inc. (NYSE:GPS), which dropped 5.7% following the departure of the head of Old Navy to take the reins of Ralph Lauren Corp. (NYSE:RL), which saw its shares rise 13.6% in response. As a result, GAP faced multiple sell side downgrades and cautious commentary.
On the economic front, the September ADP private payroll report was solid, with 200,000 additions the best result since June. That suggests Friday’s all-important government payroll report will be strong. And thus, it suggests that the Federal Reserve will have the economic data it needs to justify a December rate hike.
Nervousness surrounding the first potential rate hike since 2006 should keep the pressure on stocks. That’s good news for the VelocityShares 2x VIX (NASDAQ:TVIX) position Edge subscribers trimmed today for a 12.5% gain since Sept. 22.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
