Dow tries to mount stock-market rally as China cuts interest rates

U.S. stocks moved sharply higher Tuesday attempting to partially recover from the brutal selloff during the previous session, as China’s central bank cut interest rates.

Trading on Wall Street remained volatile, however, with the NYSE invoking Rule 48for the second straight day, intended to facilitate a smooth opening. Implied volatility as measured by the CBOE Volatility index VIX, -28.01% on Tuesday fell 23% to 31, but remains at elevated levels.

“The kind of volatility we saw over the past week is normal historically. This is what risk premium means,” said Colleen Supran, a principal at San Francisco-based Bingham, Osborn & Scarborough.

“We don’t know whether the correction is over or not, but usually when volatility picks up it gains momentum,” Supran said.

The S&P 500 SPX, +2.44% rose 36 points, or about 2%, to 1,930. The benchmark index fell into correction territory on Monday, after sliding to its lowest level since last October.

The Dow Jones Industrial Average DJIA, +2.35% gained 287 points, or 1.8 %, to 16,161 at the open, with nearly all 30 components climbing, after three days in which all fell.

The Nasdaq Composite COMP, +3.40% advanced 118 points, or 2.6% to 4,644, led by big gains in Apple Inc., which jumped 4.9%.

Read: Jeffrey Gundlach says stocks have further to fall

Before the market open, futures for all three benchmarks were already trading firmly higher early in the morning, but extended those gains as the People’s Bank of China cut its benchmark interest rate and reduced its reserve requirement ratio by 0.5 percentage point.

The PBOC injected 150 billion yuan ($23.40 billion) into the financial system to ease selling pressure on the country’s stock market. The central bank’s interest-rate move came after Asian markets had closed. Meanwhile, China’s Shanghai Composite Index SHCOMP, -7.63% closed 7.6% lower at 2,964.97 on Tuesday.

“We would be cautions to avoid any big moves, either selling or buying at this stage,” Supran added.

Economists at Goldman Sachs, however, warned not to panic too much over the weaker Chinese growth outlook and instead use the current market jitters to look for new investments.