Wall Street Rebounds from Three-day Global Rout

Wall Street rebounded from a 3-day global rout and the biggest 1-day declines in the Dow and S&P 500 as it saw the biggest gains in 15 months in another wild trading session on Tuesday.

The Dow Jones Industrial Average finished up 567 points, or 2.3%, at 24,913, a day after having recorded its biggest one-day points fall ever. The S&P 500 was up 1.7% to 2,695, its best performance since Donald Trump won the US election.

The Nasdaq Composite ended up 148.36 points, or 2.1%, at 7,115.88.

The swings on Wall Street indexes were wide, with an 89-point difference between the S&P 500 index’s intraday high and low.

“We’re bouncing around here,” said Janna Sampson, co-chief investment officer at Oakbrook Investments LLC in Illinois. “The market clearly hasn’t decided what the sentiment for the day is.”

Over the past week, stock markets around the world had lost $4 trillion. It began when bond yields rose and inflation was higher. These were buoyed by Friday’s January US jobs report that triggered worries if the Federal Reserve would raise benchmark interest rates at a faster pace than expected this year.

“Markets are coming to the conclusion that the US economy is close to overheating and therefore that the risks of inflation are bigger than the risks of a recession,” said Torsten Slok, chief international economist at Deutsche Bank.

The US 10-year yields plunged as much as 2.65% before a fresh sell-off dragged them back up to 2.80%, a range that was seen extremely rarely.

During Tuesday’s trading session, many investors focused on the Vix volatility index, Wall Street’s fear gauge. It briefly shot to its highest level since the 2015 Chinese currency devaluation.

The Vix volatility index shifted markedly throughout the day, hitting a session high above 50 but fell back to 31, which was still above its historic average.

“I don’t think the volatility is over,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. “These types of moves tend to take about 3 weeks to get through the system … and volatility just doesn’t suddenly settle down.”

Asian markets similarly recovered on Wednesday, supported by Wall Street’s rebound.

In Japan, the Topic index rose 3.1% in morning trading after dropping 4.4% the previous day, while the Nikkei advanced 3.2%.

Hong Kong’s Hang Seng index was up 2.5%, while Australia’s S&P/ASX 200 index gained 1.1%.

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