"Suddenly the mood has changed," said David Joy, marketing director at Ameriprise Financial.
Investors were worried that a record $ 84 billion was being shot out by global funds over the six weeks ending January 2, according to EPFR data. Exodus surpassed the previous six-week high that was reached during the financial crisis in 2008, according to UBS.
"Warehouse went too far. The market was pricing in a recession ̵[ads1]1; but basically did not support it," Joy said.
Powell changes his tune
The Fed played a key role in both the market route and the subsequent rebound.
"The Fed was the primary cause of the decline – and for reversal in sentiment," said Joy.
Nevertheless, stocks have a long way to go before you restore the entire ground lost under the slide. Dow remains nearly 3,000 points away from record highs.
Job Report, Valuation Help
The report in December worked relieved financial jitters by showing that the US labor market was very strong at the end of 2018. US companies added 312,000 jobs last month, blowing estimates.
The commercial war is the major X factor. Investors were encouraged this week by trade negotiations in Beijing which unexpectedly stretched into a third day.
Oil price, junk bonds rally
"Unless the United States was about to fall into recession, it was highly likely that the market had gone too far and would return," wrote David Kelly, global chief strategist at JPMorgan Funds, to clients Monday.
S & P 500 dropped to just 13.5 times forecast earnings, well below the 25-year average of 16.1, according to Kelly.
At these multiples, even some bears turned around for bargains.
"The values have reached an attractive level on the index level for the first time this year," wrote Michael Wilson, chief US stock strategist at Morgan Stanley, in a report on Monday. Wilson was warning of a decline in the market for several months.
Selling may also have been exaggerated in the oil plate. US oil prices climbed back over $ 50 a barrel on Wednesday, leaving them on track for an eight-day win. It has not happened since July 2017.
Even unwanted bonds have benefited from the recovery. After losing ground last year, US high yield bonds have returned 2.6% so far in 2019. This is the best start of the year since 2009, according to UBS.
More "obstacles" to clear
So is it safe to say that the market correction is over? Maybe not.
The market is likely to come under renewed pressure if trade negotiations in the US and China fall, and the Fed sounds a more aggressive tone, or the global economy slows down more than feared.
The bottom process is usually cluttered, with markets often tested again in previous downs.
"It is a strong rebound and very encouraging – but not decisive. You have to be a little careful," said Ameriprise's Joy.
Wilson warned of further "obstacles" to remove, including more negative economic and earnings data and the need for the Fed to shift from one more dovish tone to more bold action.
"We don't think it's time to blow the clear signal yet," he wrote.