Strong gains in China, Japan lead equity markets higher S&P 500 poised to pare more of last week's 3.4 percent drop U.S. stock-index futures advanced, after equities posted their second-biggest rally this year, as Japanese shares surged while optimism increased that China can tame its volatile markets. Futures on the Standard & Poor’s 500 Index added 1 percent to 1,985 at 8:33 a.m. in New York. The underlying gauge surged 2.5 percent yesterday after signs of stability in China led global equities higher. Contracts on the Dow Jones Industrial Average climbed 184 points today, or 1.1 percent, to 16,636 while those on the Nasdaq 100 Index rose 1.2 percent. “U.S. stocks are up in sympathy with the enormous rally in Japanese stocks,� said Daniel Weston, chief investment officer of Aimed Capital in Munich, Germany. “There’s Treasuries selling and that money is shifting today into stocks. I see bonds down as a reflection of an imminent Fed rate rise, which is another positive for stocks as they’re a better alternative than cash.� Stocks in China rose as the finance ministry pledged to accelerate construction of some major projects and reduce companies’ tax burden, while a pledge by Japanese Prime Minister Shinzo Abe to lower the corporate tax rate helped boost Tokyo’s biggest rally since 2008. Wide market swings and rapid shifts in investor sentiment have become more prevalent since China’s currency devaluation on Aug. 11 sparked concerns that a slowdown in the world’s second-largest economy would spread. The S&P 500 yesterday regained almost three quarters of its 3.4 percent slide last week, which was the second-biggest retreat since December behind the 5.8 percent plunge it suffered in the five days through Aug. 21. In 10 of the last 13 days, the benchmark has closed with a move of at least 1.3 percent. The Chicago Board Options Exchange Volatility Index Tuesday snapped a streak of 11 straight sessions above 25, a level that before August it touched on just five days since 2011. Investors remain confident the Federal Reserve will raise borrowing costs this year, even as they pare bets on a move at next week’s meeting. Traders are pricing in a 28 percent chance the central bank will increase rates this month, down from 48 percent before China’s devaluation. Odds of a move at the December gathering are about 60 percent, according to data compiled by Bloomberg. A Bank of America study showed that the Fed rarely makes a move amid the recent level of equity turbulence. In four tightenings since 1990, including the tapering of bond purchases announced in 2013, the S&P 500 had posted positive returns over the prior three and six month periods, and was within 3 percent of the gauge’s 52-week high, according to the report. By comparison, the benchmark index is down 5.3 percent over the last three months and is 7.5 percent below its high of 2,130.82 reached in May. Without any major economic data being released between now and next week’s meeting, movements in the stock market will be one of the few indicators of investor sentiment available to Fed members.

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