US Markets

Dow rallies more than 180 points, rebounding from its worst day since October

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Market appeared overdue for a 'corrective phase,' says Wolfe Research's John Roque

Stocks rose on Tuesday following the market's biggest sell-off in more than three months as investors grapple with lingering fears over a possible coronavirus outbreak.

The Dow Jones Industrial Average jumped 187.05 points, or 0.7%, to 28,722.85, snapping a five-day losing streak. The S&P 500 climbed 1% to 3,276.24 while the Nasdaq Composite advanced 1.4% to 9,269.68. At its high of the day, the Dow was up more than 280 points.

Apple and Goldman Sachs led the Dow's gains, rising more than 1.8% each. The S&P 500 was led higher by the tech and financials sectors, both of which surged more than 1%. The two sectors were among the hardest hit as worries over the virus increased.

The Dow and S&P 500 had their biggest drop since October on Monday. The Dow plunged more than 450 points while the S&P 500 logged in its first pullback of at least 1% in 74 sessions. The Nasdaq also had its biggest one-day decline since August amid fears the spreading coronavirus could hurt the global economy.

"The wall of worry is back under construction with concerns over the coronavirus and the pace of global growth and valuation," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "Stocks are rallying following yesterday's sell-off, however, the unknowns remain unknown."

"At a minimum, the volatility we're experiencing now is likely to be more of the norm than the exception over the next few weeks," Sandven said.

A trader works on the floor of the New York Stock Exchange, January 28, 2020.
Bryan R Smith | Reuters

In China, where the virus originated from, the virus has killed more than 100 people while over 4,500 have been infected. Senior staff at the White House are considering travel restrictions on China, concerned about Chinese citizens traveling to the U.S. amid the fast-spreading virus, CNBC reported, citing sources.

The State Department had advised Americans to "reconsider travel to China due to the novel coronavirus." The Centers for Disease Control and Prevention also said travelers should avoid all nonessential travel to China.

President Donald Trump said the U.S. is in "very close communication" as it relates to the virus.

Investors worry the current situation in China is similar to the severe acute respiratory syndrome, or SARS, outbreak of 2003. Stocks also fell back then amid the outbreak's uncertainty before recovering.

"From an investment perspective the largest challenge around the Wuhan coronavirus is the lack of historical comparisons that might help sensibly frame the risks," said Nicholas Colas, co-founder of DataTrek Research. He noted, however, comparing the current situation to the SARS outbreak may not work given how much Chinese demographics and economic dynamics have changed.

"China is in a better position to address the current crisis relative to SARS, both because its population is now more affluent as well as the country's improvements to its national health care system," Colas added.

Meanwhile, the corporate earnings season continued with 3M, Pfizer and Harley-Davidson releasing their quarterly numbers. Pfizer and 3M posted disappointing earnings for the previous quarter, sending their shares down 5.1% and 5.7%, respectively. Both stocks were among the worst performers in the Dow. Harley-Davidson's earnings per share beat expectations, but a disappointing revenue figure helped send the stock down 3%.

Of the S&P 500 companies that have reported thus far, 67% have posted better-than-expected earnings, FactSet data shows.

Apple is among the S&P 500 components set to report after Tuesday's close. Despite Tuesday's gains, the tech giant is down more than half a percent for the week and is trading below its record high from earlier this month.

On the data front, U.S. consumer confidence rose more than expected in January as sentiment around the labor market improved.

—CNBC's Michael Bloom contributed to this report.