NEW YORK (REUTERS) - U.S. stocks opened sharply higher on Tuesday after weak economic data out of China bolstered hopes of more stimulus measures from the Chinese government.
China's imports shrank far more than expected in August, falling for the 10th straight month. Imports fell 13.8 per cent from a year earlier, more than the 8.2 per cent drop economists had expected.
However, Chinese stocks rose nearly 3 per cent on Tuesday as a surge in late-afternoon buying helped erase early losses. Late on Monday, China said it would remove tax on dividend incomes for investors who hold stocks for more than a year in an effort to encourage longer-term investment. "With volatility having receded somewhat during the past few days it appears that investors have been reassessing the potential negative fallout from the slowdown in China," said Markus Huber, a senior analyst at Peregrine & Black.
At 9:46 a.m. ET (9:46 pm Singapore time) the Dow Jones industrial average was up 306.56 points, or 1.9 per cent, at 16,408.94, the S&P 500 was up 36.69 points, or 1.91 per cent, at 1,957.91 and the Nasdaq Composite was up 98.86 points, or 2.11 per cent, at 4,782.78.
All the 10 major S&P sectors were higher with the technology index's 2.15 per cent rise leading the advancers. Apple shares were up 2.3 per cent at $111.82, a day before the iPhone maker is expected to unveil new offerings. The stock was the biggest boost on the S&P and the Nasdaq.
Global financial markets have been rattled in recent weeks by fears that China's slowdown could drag on already sluggish global growth, prompting some investors to bet that the U.S. central bank will delay a hike until the end of the year.
Wall Street capped a tough week on Friday, with major indexes closing down more than 1 per cent, after a mixed August jobs report did little to quell uncertainty about whether the Federal Reserve will increase interest rates this month.
Following Friday's employment data, futures market traders predicted about a 20 per cent chance a rate hike will come this month, down from around 30 per cent before the jobs report.
Nonfarm payrolls increased by 173,000 last month, fewer than the 220,000 that economists polled by Reuters had expected. But the unemployment rate dropped to 5.1 per cent, its lowest in more than seven years, and wages accelerated.
The Fed has said it will raise rates for the first time in nearly a decade when it sees a sustained recovery in the economy. While the labor market has strengthened, inflation remains below the 2 per cent target.
Data on Tuesday showed U.S. small business confidence rose modestly in August, suggesting the economy continued to grow at a steady clip halfway through the third quarter.
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota is expected to speak at an event later in the day in Evanston, Illinois.
Fitbit was up 11.8 per cent at $35.62 after Morgan Stanley upgraded the stock to "overweight".
Alibaba was up 2.9 per cent at $65.81 after German retailer Metro said it will use Alibaba's Tmall Global platform to offer a range of German products online to Chinese consumers.
Media General rose 6.3 per cent to $11.83 after it said it would buy diversified media company Meredith Corp for about $2.34 billion to create the third-largest local TV station owner in the United States. Meredith was up 10.8 per cent at $50.89.
Advancing issues outnumbered decliners on the NYSE by 2,432 to 329. On the Nasdaq, 2,156 issues rose and 373 fell.
The S&P 500 index showed one new 52-week high and no new lows, while the Nasdaq recorded 23 new highs and six new lows.