U.S. stocks closed more than 2 percent higher Tuesday, rebounding after a long weekend from their second-worst week for the year as gains in global markets boosted sentiment.
"I think it's just a bounce from a lousy week," said Maris Ogg, president of Tower Bridge Advisors. "There are a number of things coming up (such as bank loan reviews in October) that I think we need to get through before this is over."
The major averages closed up about 2.5 percent for their second-best day of the year. The Dow Jones industrial average ended 390 points higher, slightly off a 401-point gain hit in the minutes just before the close. General Electric jumped 4 percent as the greatest blue chip advancer.
GE won European approval Tuesday for a roughly of the power business of France's Alstom. The acquisition is the largest purchase in GE's history and came 16 months after the first announcement.
The Nasdaq outperformed with gains of more than 2.7 percent, up 1.6 percent for 2015, while the other two averages remain negative for the year so far.
Apple closed about 2.7 percent higher, helping information technology as the second-best performing S&P 500 sector.
The S&P 500 and Nasdaq composite closed out of correction territory, or within 10 percent of their 52-week high. The Dow ended less than 0.2 percent away from exiting correction mode.
"We're pausing to digest a violent selloff," said Adam Sarhan, CEO of Sarhan Capital. "At this stage in the game it's a very important and healthy (development)."
He noted the S&P 500 remains in a range between 1,867 and 1,993, after closing at 1,921 Friday.
U.S. stocks closed more than 1 percent lower Friday, when mainland Chinese exchanges were closed, under pressure from uncertainty over developments in China and the timing of a U.S. rate hike. The major averages closed down about 3 percent for the week, their second-worst for the year.
Mainland Chinese stock markets reopened Monday after a four-day weekend for the commemoration of the end of World War II. U.S. markets were closed Monday for the Labor Day holiday.
"I think the worst-case scenario of China reopening (lower) didn't come to fruition," said Art Hogan, chief market strategist at Wunderlich Securities. You can "hear the sigh of relief globally and domestically."
Dow futures briefly added more than 300 points following gains in European stocks. Benchmark stock indices in the U.K., France and Germany ended more than 1 percent higher.
"I think it's a week where we're risk-on... barring any negative news out of China," Hogan said.
Asian stocks closed mixed Tuesday. Japan's blue-chip Nikkei stock index closed down 2.4 percent and move into negative territory for the year so far as the weak trade numbers fueled concerns about demand for Japanese exports from China.
The Hang Seng ended up 3.28 percent and the Shanghai Composite closed almost 3 percent higher, brushing aside the soft data on reports that railway projects worth almost $11 billion have been approved.
Data released Tuesday showed China's dollar-denominated exports declined by 5.5 percent year-over-year in August, while imports tumbled 13.8 percent.
On Monday, China's foreign exchange reserves posted their biggest monthly fall on record in August, reflecting Beijing's attempts to halt a slide in the yuan and stabilize financial markets following the government's surprise move to devalue the currency last month.
U.S. markets remain focused on the Federal Reserve ahead of its key meeting next week, when policymakers could raise interest rates for the first time in more than nine years. Many analysts said last Friday's nonfarm payrolls report gives the central bank enough support for the move.
"The market volatility continues and will probably stay this way until we get the Fed out of the way," said Peter Cardillo, chief market economist at Rockwell Global Capital.
U.S. July consumer credit increased by $19.10 billion, while June's figure was revised up $27.1 billion from $20.7 billion.
The National Federation of Independent Business said its Small Business Optimism Index rose modestly in August, up half a point to 95.9. The gain suggests the economy continued to grow at a steady clip halfway through the third quarter.
The Dow Jones Industrial Average closed up 390.30 points, or 2.42 percent, at 16,492.68, with General Electric leading all blue chips higher.
The Dow transports ended 2.8 percent higher as JetBlue led all constituents higher.
The closed up 48.17 points, or 2.51 percent, at 1,969.40, with health care and information technology leading all 10 sectors higher.
The Nasdaq closed up 128.01 points, or 2.73 percent, at 4,811.93.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 25.
About four stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 886 million and a composite volume of nearly 3.5 billion in the close.
Crude oil futures for October delivery settled down 11 cents at $45.94 a barrel on the New York Mercantile Exchange. Gold futures settled down 40 cents at $1,121.00 an ounce.
The U.S. dollar traded mildly lower against major world currencies, with the euro near $1.12.
Treasury yields held higher, with the 10-year yield at 2.19 percent and the at 0.73 percent.
The U.S. Treasury sold $24 billion in 3-year notes at a high yield of 1.056 percent.
On tap this week:
Earnings: Casey's General, Dave & Buster's, Men's Wearhouse, Pep Boys, TiVo
Earnings: HD Supply Holdings, Barnes & Noble, Hovnanian, Palo Alto Networks, Box, Krispy Kreme
7 a.m.: Mortgage applications
10 a.m.: JOLTS
10 a.m.: Quarterly services survey
1 p.m.: 10-year note auction
Earnings: Lululemon Athletica, Finisar, Zumiez
8:30 a.m.: Jobless claims
8:30 a.m.: Import and export prices
10 a.m.: Wholesale trade
10:30 a.m.: Natural gas inventories
11:00 a.m.: Oil inventories
1 p.m.: 30-year bond auction
4:30 p.m.: Fed balance sheet, money supply
Earnings: Kroger, Mattress Firm
8:30 a.m.: PPI
10 a.m.: Consumer sentiment
1 p.m.: Oil rig count
2 p.m.: Treasury budget
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