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Dow soars more than 1,050 points, its biggest point gain in history, recovering from days of losses

WASHINGTON - Stocks on Wednesday climbed back from their epic Christmas Eve plunge as all three indexes posted big gains.

FILE - In this Tuesday, Nov. 20, 2018, file photo, a trader works at the New York Stock Exchange.
FILE - In this Tuesday, Nov. 20, 2018, file photo, a trader works at the New York Stock Exchange.Read moreMark Lennihan / AP

WASHINGTON — Stocks on Wednesday climbed back from their epic Christmas Eve plunge as all three indexes posted big gains.

The Dow Jones industrial average roared more than 1,050 points in late afternoon — nearly 5 percent — as stocks snapped a four-day losing streak that had placed the 10-year bull market on the edge of death on Monday.

"Today the market's message is that we have nothing to fear but fear itself," said Ed Yardeni, president of Yardeni Research. "The recent sell-off reflected fears of an impending recession which were blown away today by Amazon and other retailers reporting a record holiday selling season. Santa is back."

White House economic adviser Kevin Hassett tried to bring some calm to the markets earlier Wednesday when he assured reporters that Federal Reserve Chairman Jerome H. Powell's job is "100 percent safe." The market started surging after his remarks.

"Yes, of course, 100 percent," said Hassett, the chairman of the president's Council of Economic Advisers, when asked by reporters at the White House if Powell's job is safe. "Absolutely."

Hassett, in an appearance on Fox Business Network, also said President Donald Trump “is very happy” with Treasury Secretary Steven Mnuchin. Mnuchin created worry last weekend when he phoned the chief executives of U.S. banks regarding the economy.

Trump’s criticism of the Fed and Powell has shaken Wall Street as it weathers its worst December in history.

The Dow was whirling between slightly negative and 200 points up in the first hours of Wednesday’s session before its early afternoon lift on the tails of surging blue chips Apple, Home Depot, Microsoft, Visa, and Nike. Facebook and Amazon shares were up more than 6 percent each.

All three major indexes were on pace to snap a four-day losing streak. The S&P 500 and technology-heavy Nasdaq Composite also bounced. The Nasdaq was up more than 5 percent and the S&P posted a nearly 5 percent pop by closing.

Crude oil prices surged, posting their biggest increase in two years after a 30-percent plus drop since October. West Texas Intermediate crude was up nearly 10 percent at around $46 per barrel. Benchmark Brent crude increased more than 8.5 percent to more than $54 per barrel.

The post-holiday rally comes after a shortened Christmas Eve trading session left the Nasdaq deep into correction territory, and the S&P within a wisp of a correction.

The near-decade long bull market that began in March 2009 earned a reprieve on Wednesday’s rally. Consumer discretionary, energy, and technology were leading the way.

Trump tried to create his own White House rally on Christmas Day when he suggested that the pullback in U.S. stock markets is a good buying opportunity for investors.

"We have companies — the greatest in the world, and they're doing really well," Trump told reporters at the White House. "They have record kinds of numbers. So I think it's a tremendous opportunity to buy. Really a great opportunity to buy."

All three major U.S. indexes — Dow, S&P, and Nasdaq — finished down 2 percent or more on Christmas Eve. The Dow closed down 653 points.

Ten of the S&P’s 11 sectors were in correction coming into Wednesday, although all were higher in early trades. A correction is generally defined as a 20 percent retreat off recent highs.

Investors have been shaken by recent economic and political developments, including the abrupt resignation of Defense Secretary Jim Mattis; a partial federal government shutdown; an interest rate hike; speculation that Trump might seek to fire Powell; Mnuchin’s calls to U.S. banks; and Trump’s sudden decision to withdraw U.S. troops from Syria against the counsel of his national security team.

Some saw Wednesday's rally as digesting Mnuchin's calls to bankers.

"It's an unwind of Monday's reaction to Mnuchin's unexpected phone calls," said Simeon Hyman, global investment strategist at ProShares. " I wouldn't take anything else from it. If you net today and Monday out, it doesn't tell you anything new."

The president on Christmas Day cast fresh doubt on the record of Powell, whom he has increasingly blamed for the market weakness.

"Well, we'll see," the president said when a journalist asked whether he had confidence in Powell. "They're raising interest rates too fast; that's my opinion. But I certainly have confidence . . . I think that they will get it pretty soon. I really do."

Presidents are rarely happy with interest rate increases, but Trump's vocal criticism of Powell has Wall Street concerned.

"Markets are becoming more rattled by criticism of the Fed," said Kristina Hooper, Invesco chief global market strategist. "The Fed instilled confidence despite the global financial crisis and government shutdowns. So while there is a minority view that stocks would rally if Powell were to be replaced, I believe it would cause a serious sell-off because of what it represents."

“Having said that,” Hooper said, “the Fed should be more flexible regarding balance sheet normalization, given how powerful a tool it is.”