U.S. stocks, still searching for stability after Monday's sell-off and a rocky start to the new year, surged Tuesday as volatile oil prices climbed 6% at one point and Wall Street shrugged off another stock rout in China overnight.
Investors were encouraged by a batch of better-than expected corporate earnings reports as several companies in the Dow Jones industrial average beat estimates, including 3M (MMM), Johnson & Johnson (JNJ) and Procter & Gamble (PG).
The Dow ended up 282 points, or 1.8%, its best one-day point-gain since Dec. 4. The Standard & Poor's 500 stock index gained 1.4% and the Nasdaq composite was 1.1% higher.
Stocks also got a lift from some solid economic data, with November home prices up 0.9% in November, topping forecasts, according to S&P Case Shiller. January consumer confidence also topped expectations, hitting a level of 98.1, above December's reading of 96.3. The strong reading on consumer confidence suggests consumers have not been totally freaked out by the financial markets' wild gyrations in 2016.
Philip Wen, chief investment strategist at MBA, says the rally has been fueled by the rebound in oil prices, solid earnings and good economic data. But he believes the big reason for the rally is that Wall Street is betting that the Federal Reserve will signal Wednesday at the end of its two-day policy meeting that it may have to dial back its plans for four interest rate hikes this year due to market and economic volatility to kick off 2016.
"We believe a March rate hike is off table and that the Fed will take a more cautious approach. Says Wen of MBA Capital. We believe it’s going to be an exciting year.