| NEW YORK
NEW YORK Wall Street rebounded sharply on Wednesday after six straight days of large declines caused by China worries, while long-dated bond prices fell after a top Federal Reserve official scaled back expectations of a September rate increase.
The dollar rebounded for a second straight session as firmer U.S. stocks and a recouping of some losses in European shares reduced the need to buy safe-haven currencies such as the yen. Oil prices fell, however, after a drawdown in U.S. crude stockpiles was offset by a larger-than-expected build in gasoline. [O/R]
Influential New York Fed President William Dudley said earlier in the day that a rate increase next month seems less appropriate given the threat posed to the U.S. economy by recent global market turmoil.
Stocks were choppy for much of the day even though investors viewed the hint of caution about rate hikes as reassuring, but stocks gained momentum in the late afternoon, led by a big increase in the S&P 500 technology sector .SPLRCT.
Bets about the timing of a rate increase was secondary to speculation about the timing of an end to the recent sell-off, said Michael Matousek, head trader at U.S. Global Investors Inc in San Antonio.
“This rally took a lot of people by surprise. A lot of people were anticipating the last half of the day would roll over and fall off and that hasn’t happened. You could see the buying accelerating at mid-day and people saying I’m wrong and starting to cover their shorts,” said Matousek. “You have the shorter-term guys moving the market.”
At 30, the CBOE Market Volatility Index .VIX still indicated significant uncertainty, although the "fear index" was well below Monday's 6-1/2 year peak of 53.3.
The Dow Jones industrial average .DJI rose 619.07 points, or 3.95 percent, to 16,285.51, the S&P 500 .SPX gained 72.9 points, or 3.9 percent, to 1,940.51 and the Nasdaq Composite .IXIC added 191.05 points, or 4.24 percent, to 4,697.54.
The Dow and the S&P notched up their biggest daily gains since November 2011 and Nasdaq had its biggest one-day jump since August that year. But several investors cautioned that the market's weak spell may not yet be over.
"We have an optimism that the sky is not falling today. It doesn't mean it's not going to fall tomorrow," said Adam Sarhan, chief executive of Sarhan Capital in New York.
Traders unplugged earlier bets that were based on the view that an imminent rate increase will make short-dated Treasuries lag. The exit from these "curve flatteners" spurred the 30-year yield to its highest in 2-1/2 weeks.
The dollar index .DXY, which measures the greenback against a basket of major currencies, was up 0.7 percent.
In late trading, the euro was down 1.6 percent at $1.1335 EUR=, hurt by comments from a senior European Central Bank official. Peter Praet said the risk of the ECB missing its inflation target has increased because of falling commodity prices and weakness in some overseas economies. [ID:nL1N11126W]
Europe's FTSEurofirst 300 index of major companies .FTEU3 closed down 1.9 percent in a choppy trading day. China's key share indexes also ended lower after attempts to move higher were slapped back by waves of selling, reflecting hopes for more government and central bank support.
The Shanghai Composite Index .SSEC had ended down 1.3 percent, its fifth straight day in the red. [.SS]
Despite China's struggles, Asia markets had some bright spots. Japan's Nikkei .N225 saw a 3.2 percent jump and Korea's KOSPI .KS11 showed its biggest jump in two years with a 2.6 percent increase.
U.S. crude oil CLc1 settled down 1.8 percent at $38.60 a barrel while Brent crude LCOc1 settled down 0.2 percent at $43.14.
Copper CMCU3, often considered a proxy for Chinese and global economic activity, was down 2.6 percent while prices of gold XAU=, traditionally a safe-haven asset, were off 1.5 percent.
(Additional reporting by Noel Randewich in San Francisco, Richard Leong and Gertrude Chavez-Dreyfuss in New York, Sujata Rao in London, Saikat Chatterjee in Hong Kong Editing by Nick Zieminski and Steve Orlofsky)