Rally in US stocks falters

A rebound in the US that took the Dow Jones Industrial Average up more than 440 points disappeared as traders said trepidation over what will happen in China’s market made holding on to stocks too risky for most investors.

The 30-stock index slid 1.3% to 15,666.44 at close in New York, down 4% from its highest point.

The peak-to-trough retreat matched Monday’s selloff, when concern about global growth ignited the worst selloff in four years.

The Standard & Poor’s 500 Index went from up 2.9% to down 1.4%, with most of the selling concentrated in the final two hours of trading.

“We just saw a crazy evaporation of gains after being up the majority of the day,” said Stephen Carl, principal and head equity trader at Williams Capital Group.

“People are nervous about the potential volatility that could erupt or resurface in the market. They’re not sure what’s going to happen overseas, and that uncertainty is winning out.”

Other world markets rebounded yesterday with stocks, oil prices and bond yields all rising after China cut interest rates and banks’ reserved requirements in a bid to kick-start its wavering economy.

Global markets had been pummelled on Monday after Chinese shares fell almost 9%, prompting investor calls for remedial action from authorities that grew louder overnight after the Shanghai Composite Index slumped.

The unwinding disappointed bulls who earlier in the day staked hopes on China’s efforts to inject stimulus into its economy.

The central bank yesterday cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside in an attempt to stem the country’s biggest stock market rout since 1996 and a deepening economic slowdown.

More than $2tn (€1.73tn) has been erased from US equity values since last Wednesday, breaking a calm in a stock market that before this week had gone almost four years without a 10% correction.