The US stock market is bouncing back from a tough start to 2015.
Investors sent shares sharply higher for a second straight day, erasing the market’s heavy losses from the first few days of the year.
The gains were driven by a combination of positive economic news from the US and hopes for stimulus from Europe’s central bank.
The price of oil is also showing signs of stabilising after six months of heavy losses, and there is renewed confidence that the Federal Reserve will keep supporting the economy as growth outside the US appears to be flagging.
The wild swings in stock prices will likely become more common this year as investors try and anticipate when, if at all, the Fed will start to raise interest rates, said JJ Kinahan, chief market strategist at TD Ameritrade.
“People will have to get used to volatility at a higher level,” he said. It is going to be “one of the primary stories for 2015″.
The Standard & Poor’s 500 index climbed 36.24 points, or 1.8%, to 2,062.14. The index is now up 0.2% for the year, after falling 2.7% in the first three days of trading.
The Dow Jones industrial average gained 323.35 points, or 1.8%, to 17,907.87. The Nasdaq composite gained 85.72 points, or 1.8%, to 4,736.19.
Comments from Charles Evans, president of the Fed’s Chicago branch, late yesterday gave stocks a lift.
Mr Evans said the US central bank should not rush to raise interest rates, because inflation was likely to remain tame for several years.
The prospect of more stimulus from other central banks is also driving the rebound.
European data yesterday showed that consumer prices fell in December for the first time since 2009.
That increased pressure on the European Central Bank president Mario Draghi to act to support the region’s flagging economy.
Many analysts expect the bank to announce a plan this month to buy European government bonds.
Such a move, known as quantitative easing, is designed to hold down long-term interest rates and stimulate borrowing and spending.
“Oddly enough, the market was helped by some of the weaker data out of the eurozone,” said Quincy Krosby, a market strategist at Prudential Financial.
“In many ways, the bad news was the good news.”
Investors also got encouraging news on hiring today.
A report showed that fewer Americans applied for unemployment benefits last week. That is a sign that employers expect the economy to keep growing, prompting them to hold on to workers.
The labour department said that applications for unemployment benefits fell 4,000 last week to 294,000.
Economists predict a government report tomorrow will show that US employers added 243,000 jobs last month.
Among individual stocks, Constellation Brands was one of the day’s biggest gainers.
The company, which owns the Corona and Modelo beer brands, said its fiscal third-quarter earnings climbed thanks to increased beer sales.
The earnings surpassed the expectations of Wall Street analysts, and the company also raised its full-year profit forecast. The stock gained $4.59, or 4.5%, to $107.64.
In energy trading, oil ended the day fractionally higher after fluctuating between small gains and losses for most of the day.
US crude oil gained 14 cents, or 0.3%, to $48.79 a barrel. Brent crude, a benchmark for international oils used by many US refineries, fell 19 cents to close at $50.96 in London.
A big fall in the price of oil earlier in the week helped spark a big sell off in the stock market.
The price of the commodity has fallen by more than half since June last year as traders try to price in a glut of supply due to increased production.
The sharp drop in prices has also prompted concern that economies outside the US remain weak.
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