The S&P 500 Index rebounded on Wednesday after sharp losses on Tuesday saw the CBOE Volatility Index (VIX) jump 16%.
In the end, all three benchmark indexes ended up closing higher, with the Dow Jones Industrial Average up by 0.67%, the Nasdaq up by 1.47%, and the S&P 500 up by 0.92%.
It was a day of steady gains for stocks as the S&P 500 moved consistently higher from Tuesday’s low, though the index did not manage to recover Tuesday’s losses completely.
Return to optimism
A number of factors helped push stocks higher on Wednesday.
First, there was a positive session in Asia which spilled over into European and American markets.The Shanghai Composite Index moved within a whisker of the 5000 level, as investors speculated over continued interest rate cuts from the Chinese central bank.
Second, there was renewed optimism in Europe as traders bet on a new agreement regarding the Greek debt situation. Greek policymakers were set to meet with the IMF late on Wednesday to thrash out a new deal ahead of $1.74 billion worth of scheduled payments.
Thirdly, continued activity in the mergers and acquisitions space has helped boost the attractiveness of riskier assets. TimeWarner Inc. was approached by Charter Communications on Tuesday in a $50+ billion deal and on Wednesday, there were reports of a buyout of Broadcom Inc. by Avago Technologies. If it were to go ahead, the deal would be the biggest ever in the semiconductor space. Shares in Broadcom Corp. rallied 21% as a result on Wednesday.
Technicals & Outlook
The S&P 500 advanced on Wednesday and closed right on the first resistance level. However, as mentioned the market was unable to recover all of Tuesday’s steep losses.
Over the next few days, we note that most technical indicators are now bearish, so we are looking to sell in the 2,120 - 2,134 range, for a potential move to 2,090. We are also bearish over the next few weeks.
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