US market report: Dow and Nasdaq rally as oil prices return above $31 a barrel

US stock markets rallied on 22 January as investors were buoyed by the possibility of more economic stimulus from central banks, while oil prices staged a solid rebound after incurring in heavy losses since the turn of the year.

Shortly after the opening bell, the Dow Jones Industrial Average was up 1.21% to 16,075.16 while the S&P 500 and the Nasdaq were 1.49% and 1.71% higher respectively.

Oil prices surged ahead, with Brent crude jumping 5.86% to $31.07 (£21.70), while West Texas Intermediate gained 5.02% to $31.09 a barrel.

"While it's too early to suggest oil prices have bottomed, oil is very oversold and now appears to have entered into a correction period," said Oanda's senior market analyst Craig Erlam.

"Given how fierce the sell-off has been until now, it will be interesting to see just how far these rallies are allowed to run before sellers see value once again."

Boosted by comments from European Central Bank's President Mario Draghi, who on 21 January hinted at further economic stimulus, investors received more positive news after Japan's Prime Minister Shinzo Abe said "conditions for additional easing have fallen into place".

Equity markets in both Europe and Asia fed off those comments, with Japan's Nikkei 225 recording its biggest daily percentage gain since 9 September as it gained 5.88%, dragging other Asian stocks firmly into positive territory, before European markets followed suit.

"Yesterday's speech from Mario Draghi shifted the focus on to the ECB's March meeting, but in doing so he has given intuitions all the reason they need to redraw their expectations for 2016," said Alastair McCaig, market analyst at IG.

"Investment banks consensus now looks to be pointing towards March, rather than June, as the likely date for increased firepower in the current ECB monetary policy programme."

On the macroeconomic front, a preliminary reading of the January purchasing managers index for manufacturing due at 9.45am EST (2.45pm GMT) and data on existing home sales and leading economic indicators for December at 10am EST (3pm GMT) are the only economic reports scheduled for release throughout the session.

Elsewhere, General Electric posted an increase in fourth quarter core earnings, but said industrial earnings fell, while American Express was on the back foot after the credit card issuer outlined plans to cut $1bn in costs and posting a 38% decline in earnings.

Oil field services group Schlumberger after posting better-than-expected results and revealing it will cut 10,000 jobs, while Boeing after the aircraft maker said it would cut production of its 747 aircrafts by 50%.