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Dow jumps triple digits; Nasdaq leaps more than 1% as biotechs bounce

Evelyn Cheng

U.S. stocks jumped Wednesday, following a rally in global markets in an attempt to ease the pain of the worst quarter in four years. ( Tweet This )

The major averages held about1 percent higher after briefly gaining more than 1.5 percent in morning trade, with the Dow Jones industrial average leaping as much as 248.47 points. The S&P 500 recovered to trade above the psychologically key 1,900 level.

The Nasdaq composite traded about 1.4 percent higher. Earlier, the index rose more than 2 percent, helped by gains of as much as 5 percent in the iShares Nasdaq Biotechnology ETF (IBB) (IBB).

IBB pared gains to trade about 2.5 percent higher, holding in a bear market, or more than 20 percent below its 52-week high, after a sharp sell-off in recent weeks.

Apple (AAPL) gained 1 percent.

"Nothing has changed fundamentally from yesterday to today except that most of the globe is rallying with weaker-than-expected data points, with the hope of more stimulus from central banks," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management.

We want to "see if this is not a short covering rally but retail and institutional buying," he said.

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In pre-market trade, Dow futures were more than 160 points higher, while European markets traded more than 2 percent higher. Asian stocks posted gains, with Japan's Nikkei 225 stock index rallying 2.70 percent.

Soft data in Japan and the euro zone boosted hopes of more stimulus in those regions. Japanese industrial production unexpectedly fell 0.5 percent in August for the second-straight month of declines, government data showed Wednesday.

For the first time in six months , euro zone prices fell in September from the same period last year, according to the European Union's statistics office Eurostat.

Analysts also noted support for Tuesday's gains from continued signs of improvement in the U.S. labor market.

Ahead of Friday's key nonfarm payrolls data, the September ADP Employment report showed private companies added 200,000 jobs .

"I think that's certainly lending some credibility to the gains that are there," said Paul Springmeyer, senior portfolio manager at the Private Client Reserve at U.S. Bank.

"Investors are being more cautious and tactful, hence the heightened levels of volatility. We've been at pretty subdued levels (of volatility). I think any time you see multiple point percentage swings it's an overreaction," he said.

U.S. stocks closed mixed Tuesday, after plunging nearly 2 percent or more on Monday.

Crude oil struggled to rally amid concerns about a hurricane on the U.S. East Coast, news of escalation in the Syrian war, and a report that crude stockpiles rose far more than expected.

Copper spiked amid quarter-end positioning and news of an output cut in Chile . Commodities trading and mining giant Glencore (London Stock Exchange: GLEN-GB) continued to recover with a gain of more than 11 percent.

"It warns of these companies in terms of their debt and how they've managed their balance sheets," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "That to me is more a symptom of what's happened in the commodity complex than a signal."

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Wednesday is the last day of September and the final day of the third quarter, the worst since 2011 according to Barclays . The major U.S. averages are on track for a quarterly loss of more than 7 percent.

"The third quarter to me reflected uncertainty about the Federal Reserve, the uncertainty caused by not knowing how the central bank is going to raise rates. If you get a good labor report that may steel the nerves of the Fed," said David Kelly, chief global strategist at JPMorgan Funds.

Concerns about spillover from slowdown in China and the timing of a Federal Reserve rate hike sent markets into correction territory, or more than 10 percent below their 52-week highs, in late August.

The major U.S. averages recently fell back into correction mode and were close to retesting the August lows Tuesday. The Russell 2000 held below its Aug. 24 low Tuesday.

"You have increasing chatter about the rally into the year-end and that raises the question, what's going to be the catalyst for that?" Luschini said, noting increasing focus on third-quarter earnings reports following Friday's employment report.

"We think this is still in the context of this being a correction rather than a bear market," he said.

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"Hopefully we should be looking forward. We just came through a rough, 6-week patch. A lot of it was due not to fundamentals but emotions," Larson said. "We should be looking forward if ADP is any indication on a fairly consistent picture of the labor market."

In other economic news, weekly mortgage applications fell 6.7 percent on a seasonally adjusted basis for the week ending September 25, according to the Mortgage Bankers Association (MBA).

The September Chicago purchasing managers index came in at 48.7, below expectations of 53.0.

Treasury yields fell, with the 2-year yield (U.S.:US2Y) lower at 0.63 percent and the 10-year yield (U.S.:US10Y) at 2.05 percent.

The U.S. dollar traded higher against major world currencies, with the euro below $1.12 and the yen at 119.63 yen against the greenback.

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U.S. Federal Reserve Chair Janet Yellen is expected to give the opening remarks at a Community Banking Research and Policy Conference at 3 p.m. ET in St. Louis, Missouri. Last week the Fed chief suggested that the central bank was still likely to lift interest rates before year-end.

St Louis Fed President James Bullard, New York Fed President Bill Dudley and Federal Reserve Governor Lael Brainard are also scheduled to speak later in the day.

Developments in Washington could fall under the spotlight since the Federal Government runs out of money at midnight — unless Congress and the President approve a new budget or a continuing resolution.

The Senate approved legislation Wednesday to avoid a shutdown, while the House of Representatives is expected to vote on the bill later in the afternoon.

Failure to reach an agreement will result in a government shutdown Thursday.

In late-morning trade, the Dow Jones Industrial Average (Dow Jones Global Indexes: .DJI) gained 170 points, or 1.04 percent, at 16,215, with Chevron (CVX) leading advancers and Procter & Gamble (PG) and 3M (MMM) the only decliners.

The S&P 500 (^GSPC) traded up 21 points, or 1.13 percent, at 1,905, with consumer discretionary leading all 10 sectors higher.

The Nasdaq (^IXIC) traded up 61 points, or 1.36 percent, at 4,578.

The CBOE Volatility Index (VIX) (^VIX), widely considered the best gauge of fear in the market, traded near 25.

About three stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 307 million and a composite volume of 1.4 billion as of 11:45 a.m.

Crude oil futures for November delivery gained 6 cents to $45.29 a barrel on the New York Mercantile Exchange. Gold futures fell $13.10 to $1,113.70 an ounce in late-morning trade.

On tap this week:

Wednesday

3 p.m.: Fed Chair Janet Yellen welcoming remarks at St. Louis Fed event

3:10 p.m.: St. Louis Fed President James Bullard at St. Louis Fed community banking event

8:15 p.m.: Fed Gov. Lael Brainard at St. Louis Fed event

Thursday

September vehicle sales

8:30 a.m.: Initial claims

9:45 a.m.: Manufacturing PMI

10 a.m.: ISM manufacturing; construction spending

2:30 p.m.: St. Francisco Fed's Williams on outlook

Friday

8:30 a.m.: Employment; Boston Fed President Eric Rosengren at Boston Fed conference

9 a.m.: Minneapolis Fed President Narayan Kocherlakota

10 a.m.: Factory orders

11 a.m.: Cleveland Fed President Loretta Mester

1:30 p.m.: Fed Vice Chair Stanley Fischer on monetary policy at Boston Fed

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