Markets rebound as some see selling “overdone” but beware “rolling bear market”

Markets mostly rebounded on Thursday.

The S&P 500 rose 1.2 percent and the STOXX Europe 600 rose 0.5 percent.

Earlier, the Nikkei 225 plunged 3.7 percent following the US stock market's rout on Wednesday.

The European Central Bank left interest rates unchanged at its monetary policy meeting on Thursday and reaffirmed its plan to end its asset-buying programme in December provided data shows inflation remains on track to eventually meet its target.

Some analysts remain hopeful for further gains for stocks.

“From a valuation standpoint, the market is very affordable after Wednesday’s declines, and the economic fundamentals remain really solid,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

Tom Essaye, president of the Sevens Report, wrote in a note that “at this point the selling is overdone”.

Michael Brush wrote in his MarketWatch column that “it's too late” to sell.

“Recessions are what normally kill bull markets — and a recession is not likely for at least a year or more,” he said. “So the current sell-off gives you a chance to buy stocks at better valuations.”

Other analysts think the market is likely to be rocked by more waves of selling before reaching a bottom.

“We're a ways from a bounce,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.

Indeed, Michael Wilson, Morgan Stanley’s chief US equity strategist, said that current conditions represent a “rolling bear market”. “Risk-reward remains unattractive for us,” he said.