What Will U.S. Stocks Do Next?

Updated on August 26 at 4:05 p.m. ET


U.S. stocks snapped this week’s losing streak Wednesday, closing sharply higher. The Dow and Nasdaq posted triple-digit gains. The S&P also rose, ending out of correction.


The three major indexes all rose more than 3.5 percent.  The Dow Jones industrial average closed up more than 600 points, the S&P 500 was up more than 70, and the Nasdaq closed up more than 190 points.


Stocks had performed well on Tuesday, too. At one point, the Dow was up more than 400 points. But a late-afternoon fade saw all three major indexes close in negative territory. Those fears persisted Wednesday—bolstered by fears about China’s economy.


Chinese stocks continued their losing streak, and European markets closed lower amid lingering uncertainty about the health of the world’s second-largest economy.


The Shanghai composite index closed down 1.3 percent. It was a relatively better performance than Monday, when it declined 8.5 percent, and Tuesday, when it fell a further 7.6 percent. It is now firmly in negative territory for the year. Stocks in Hong Kong also finished lower, down 1.52 percent. But Japan’s Nikkei shrugged off a losing streak to close up 3.2 percent.


U.S. stocks came off two straight days of losses this week. They were buoyed Wednesday by a solid durable-goods report.


Still, stocks worldwide are struggling to move past the uncertainty caused by China’s slowing economy—though some experts say the problem is a Chinese one, and not broader. The Chinese central bank is under pressure to show it will step in when needed. On Tuesday, China cut interest rates by 0.25 percentage points to 4.6 percent, and also increased liquidity by lowering banks’ reserve-ratio requirements. The central bank has also devalued the yuan.


In the U.S., speculation over whether the U.S. Federal Reserve will raise interest rates next month is adding to the uncertainty. The Wall Street Journal adds:


Some investors think China’s economic slowdown could delay the Federal Reserve’s plans to lift interest rates from near zero later this year. Many had previously expected a September rate increase.