Global Growth Outlook Seen Intact As Stock Market Rebounds

Wall Street's solid rebound on Monday following a two-week roller-coaster ride preserved investors' outlook that the global economy remains on a steady growth path, analysts said.

Goldman Sachs and other analysts pointed to a number of factors behind their upbeat global forecast including China's plan to generate high single-digit growth, Europe's re-emergence from its sovereign debt woes, and U.S. tax cuts and increased spending.

Goldman Sachs analysts said the current market turbulence poses only a "modest" risk to their "optimistic" view on the global economy. Goldman estimated the global economy was expanding at 5.2 percent in January.

"The history of market corrections during times of strong economic data suggests that this correction will more likely be short and shallow than long and protracted," they wrote in a research note published late Sunday.

However, analysts' optimism could wither if market turbulence persists and stock losses pile up. That would hurt consumer confidence, and slow investments and spending.

The two-week sell-off pushed the Dow and S&P 500 into the red from their record peaks, down 0.5 percent and 0.7 percent for the year, respectively as of Monday. Nasdaq clung to a 1.1 percent gain after rising as much as 8.7 percent from its all-time peak on Jan. 26.

Many analysts blamed the stock market sell-off in recent weeks on rising bond yields with 10-year Treasury yields at a four-year high, and soured bets that market volatility <.VIX> would stay low.

For now, analysts said a near wipe-out of stock gains in early 2018 were overdue following a blockbuster 2017 when major U.S. stock indexes produced their best annual performance since 2013.

As such, the U.S. economy is on track to grow about 3.1 percent in 2018, according to Credit Suisse, following the budget deal last week.

"The economy is growing at the fastest pace of the recovery, enhanced by tax reform and the additional fiscal stimulus of the recent budget deal. Corporate earnings are surging," Ameriprise chief market strategist David Joy said.

On Monday, Wall Street's main indexes <.SPX> <.DJI> <.IXIC> rose for a second straight session, recovering from a vicious sell-off that slashed $6 trillion in value from stock markets around the world.

In late U.S. trading, the Dow ended up 1.7 percent; the S&P 500 up 1.4 percent and the Nasdaq up 1.6 percent. The MSCI world stock index <.MIWD00000PUS> was 1.2 percent higher.