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Stocks manage 2nd day of gains after late rally

Adam Shell
USA TODAY

Stocks staged another late day rally Tuesday, sending the Dow up 130 points, as Wall Street managed to post a second straight day of gains.

But that's not to say that investors didn't see another volatile trading session. U.S. stocks initially posted big gains early following a day of market stability in China. That rally fizzled after a renewed dip in oil prices. But stocks reversed course again and moved higher late in the day.

The Dow Jones industrial average closed up 0.8% at 16,529, based on preliminary figures, after being up as much 193 points and down as much as 76 points during the day. The broader Standard & Poor's 500 stock index rose 0.8% and the tech-packed Nasdaq composite gained 1.0%, breaking an eight-session losing streak.

Time to pity oil companies? $30 oil is here

Driving the early-session gains was another stable day for the stock market in mainland China, where the Shanghai composite rose 0.2%, rebounding from a loss of more than 5% Monday.

Specialist Anthony Rinaldi is silhouetted on a screen at his post on the floor of the New York Stock Exchange, Monday, Jan. 11, 2016. (AP Photo/Richard Drew)

Just when it looked like stocks would never go up again, the tide shifted slightly on Monday with the Dow edging higher by 52 points, relieving some of the bearish pressure that has weighed on Wall Street since the start of the year. Now, investors are eyeing a hoped-for bounce after plunging 6% last week and dipping to what Wall Street calls extremely "oversold levels."

Helping matters was a rise in the value of the Chinese currency, the yuan, for the third straight day. Prior to the recent streak of gains, the yuan had lost value vs. the dollar for eight straight trading sessions, which suggested that China's economy was worse off than previously believed.

An early rebound in oil prices initially gave stocks a boost but the gains did not stick. Benchmark U.S. crude initially rose 2.1% to above $32 a barrel before slipping back down and briefly falling below the $30 a barrel mark before settling down 97 cents to $30.44 a barrel.

Whether any stock rebound on Wall Street will be long-lasting or sizable enough to wipe out the steep early-year gains is still unknown. But for now investors will welcome a respite from the selling deluge that greeted them at the start of the year. If the Dow can post a second straight day of gains today, it will mark the blue-chip gauge's first two-session winning streak since the day before Christmas Eve.

Earnings season to the rescue? Don't bet on it

Possibly working in the market's favor is the fact that the big drop in stock prices last week has made the market look less pricey from a valuation standpoint. The S&P 500 is now trading at 15.3 times its earnings estimates for the next four quarters, down sharply from the 16.9 P-E multiple on Dec. 31 and more in line with the long-term average P-E of 14.6, according to Thomson Reuters.

"The rapid downward rerating of forward P-Es has certainly made many stocks cheaper and possibly more attractive," Edward Yardeni, chief investment strategist at Yardeni Research told clients in a research note before Tuesday's opening bell.

The fact that stocks took such a drubbing last week also knocked down prices far enough to set the market up for some type of rebound rally, Robert Sluymer, an analyst at RBC Capital Markets told clients in a note after last night's closing bell.

Shares also were heading higher in Europe, where stocks were near the highs of the session. The broad Stoxx Europe 600 was up 1.1% and shares of the German DAX were 2.1% higher.

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