US STOCKS-Dow notches record point surge in dramatic rebound

(For a live blog on the U.S. stock market, click LIVE/ ortype LIVE/ in an Eikon news window.)

* Indexes mark biggest one-day percentage gains in over nineyears

*, other retailers jump on holiday sales report

* Energy shares strong as oil prices surge

* S&P 500 sniffs bear market territory, before rebounding

* Indexes up: Dow 4.98 pct, S&P 500 4.96 pct, Nasdaq 5.84pct (Adds futures trading in paragraph 17)

By Lewis Krauskopf

Dec 26 (Reuters) - The Dow Jones Industrial Average surgedmore than 1,000 points for the first time on Wednesday, leadinga broad Wall Street rebound after a report that holiday saleswere the strongest in years helped mollify concerns about thehealth of the economy.

Following Wall Street's worst-ever Christmas Eve drop in theprevious session, the advance was also fueled by investors'reversing bets against a wide range of stocks. By the close, theDow, S&P 500 and Nasdaq had notched their largest dailypercentage gains in nearly a decade.

In a dramatic session that also saw the benchmark S&P 500come within a whisker of dropping into bear market territory,oil prices surged, boosting sentiment for risk assets such asstocks and underpinning a 6.2 percent gain for energy shares .SPNY .

Concerns about the economic growth outlook, the U.S.-Chinatrade dispute and rising interest rates have dogged stocks sincethe end of summer, and the major indexes are still down morethan 10 percent this month alone, with three more trading daysleft in the year.

Traders and investors said technical market factors alsocontributed to the rally. By some technical measures, the S&Pwas its most oversold in years following Monday's sell off.

U.S. 2018 holiday sales rose 5.1 percent from a year ago toover $850 billion, the strongest gain in six years, according toa Mastercard report. The S&P 500 retailing index .SPXRT jumped7.4 percent, while shares of online retailer AmazonAMZN.O ,which touted a "record-breaking" season, climbed 9.4 percent.*:nL3N1YV2J4

Stocks found their footing after wobbling in morning trade.The S&P 500 came within 2 points of being down 20 percent fromits late-September closing high, the threshold commonly used todefine a bear market.

"The market is extremely oversold where we left it" onMonday, said Brett Ewing, chief market strategist at FirstFranklin Financial Services. "You cannot make the assumptionthat this correction is over, but today's action is definitely avery positive signal."

The Dow Jones Industrial Average .DJI rose 1,086.25points, or 4.98 percent, to 22,878.45, the S&P 500 .SPX gained116.6 points, or 4.96 percent, to 2,467.7, and the NasdaqComposite .IXIC added 361.44 points, or 5.84 percent, to6,554.36.

The previous record point gain for the Dow was 936.42 onOct. 13, 2008, during a period when markets were whipsawedalmost daily by developments in the financial crisis, which wasthen in full swing. Over the two sessions following that gain,the Dow dropped more than 800 points.

On Wednesday, short-covering was feverish as the ThomsonReuters United States Most Shorted Index .TRXUSPMSHRT enjoyedits best percentage rise in its six-year history.

"The move you see is just everybody trying to get out ofthese super, super bearish positions that they have been in,that have been easy to make money in. ... This is ashort-covering rally," said Michael Antonelli, managing directorof institutional sales trading at Robert W. Baird.

"These kind of moves, as fun, as exciting as they are, youjust don't see this kind of stuff in healthy, normal markets,"he said.

All 11 major S&P 500 sectors ended in positive territory,with the technology sector .SPLRCT , after being beaten upduring the recent pullback, rising 6.1 percent. Only one of theS&P 500's components, Newmont MiningNEM.N , finished down onthe day.

The S&P broke a four-session streak of declines. But despiteWednesday's surge, it remained on pace for its biggest monthlypercentage drop since February 2009, during the throes of thefinancial crisis.

"Given the two months we've been through, it's hard to lookat one day and say it's all over," said Christopher Smart, headof macroeconomic and geopolitical research at Barings.

Indeed, S&P 500 futures EScv1 weakened modestly whentrading resumed later on Wednesday to kick off the overnightsession.*:nL1N1YV105

Even so, Smart said, "If you look at simple valuations inthis market, it's clearly much more attractive than it was overthe summer and I think it means that it's hard to see a lot moredownside from here."

The head of the U.S. Federal Reserve faces no risk of losinghis job and President Donald Trump is happy with his Treasurysecretary, White House economic adviser Kevin Hassett said in anapparent attempt to calm Wall Street nerves.*:nL1N1YV0DB

The most recent decline in stocks followed the Fed's policymeeting last week when the U.S. central bank raised interestrates again, and Fed Chairman Jerome Powell did not soften histone about the outlook for further financial tightening to thedegree investors had hoped.

"I think the market is realizing that the Fed is open tobeing more flexible," Ewing said.

Advancing issues outnumbered declining ones on the NYSE by a4.84-to-1 ratio; on Nasdaq, a 3.80-to-1 ratio favored advancers.

The S&P 500 posted no new 52-week highs and 194 new lows;the Nasdaq Composite recorded eight new highs and 529 new lows.

About 9.5 billion shares changed hands in U.S. exchanges,above the 9.1 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf in New Yorkadditional reporting by Terence Gabriel and Saqib Iqbal Ahmed inNew York, Medha Singh in Bengaluru; editing by Leslie Adler andChris Reese) ((; 646-223-6082; ReutersMessaging:,Twitter: @LKrauskopf))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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