U.S. stocks rallied Tuesday as a late surge helped them regain almost half their losses from the day before, when they had their biggest plunge in 6½ years. That came at the end of a day of heavy trading and huge swings for the market.
Major indexes in Asia and Europe took steep losses and U.S. markets started sharply lower, only to repeatedly change direction. After its 1,175-point nosedive Monday, the Dow Jones industrial average lost 567 points right after trading began Tuesday. After numerous turns up and down, it ended with a gain of, coincidentally, 567.
Despite the turbulence, Tuesday's trading looked similar to the patterns that have shaped the market for the last year: Investors bought companies that do well when economic growth is strongest. Gainers included technology companies, retailers such as Amazon and Home Depot, and industrial companies and banks.
Bond yields turned higher after Monday's sharp drop. As a result, the biggest losses went to high-dividend companies such as utility and real estate companies, which investors often buy as an alternative to bonds. When bond yields rise, those stocks become less appealing to investors seeking income. The yield on the 10-year Treasury note rose to 2.80% from 2.71%.
The Dow finished the day up 567.02 points, or 2.3%, at 24,912.77.
The Standard & Poor's 500 index, a broader market barometer that many index funds track, climbed 46.20 points, or 1.7%, to 2,695.14. The Nasdaq composite rose 148.36 points, or 2.1%, to 7,115.88. It was the busiest day of trading on the New York Stock Exchange since Nov. 10, 2016, two days after the presidential election.
The steep drops Friday and Monday wiped out the gains the Dow and S&P 500 made since the beginning of the year, but both remain higher over the last 12 months. The Dow is up 24% over that time; the S&P 500, 18%.
Even after Tuesday's gain, the S&P 500 is still down 6.2% from the record high it set Jan. 26. That's less than the 10% drop that is known on Wall Street as a correction.
Corrections are seen as normal during bull markets, and even helpful in curbing excessive gains and enabling new investors to buy into the market at lower prices. It has been an uncommonly long time since the last market correction, which ended almost two years ago.
Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, said the plunge wasn't caused by inflation fears alone. The markets have been unusually calm since late 2016, and he said investors were betting that would continue.
"People were positioned for more central bank easing or continued central bank easing, low rates and, importantly, low volatility," he said. "Corrections are caused by people having to reposition for new environments."
Investors remain fearful that signs of rising inflation and higher interest rates could bring an end to the bull market that has sent stocks to record high after record high in recent years.
Friday's U.S. jobs report showed wages grew at a faster pace in January, and investors worried that that means inflation is speeding up, and that the Federal Reserve will have to raise interest rates faster than previously expected in order to keep that inflation in check. Higher rates act like a brake on the economy by slowing down borrowing and lending.
Schutte said corrections can end quickly, and they often do when investors see evidence of continued economic growth. Experts do think the global economy will keep growing this year even though that is likely to bring more inflation. Schutte said that as central banks stop propping up the market, trading will probably be more volatile in the next few years.
Travel bookings site TripAdvisor was one of only two S&P 500 companies that gained ground Monday. On Tuesday it rallied an additional 14.7% to $40.84.
U.S. crude oil fell 76 cents, or 1.2%, to $63.39 a barrel in New York. Brent crude, the benchmark for international oil prices, fell 76 cents, or 1.1%, to $66.86 a barrel in London.
Wholesale gasoline fell 4 cents to $1.81 a gallon. Heating oil fell 3 cents to $1.99 a gallon. Natural gas rose 1 cent to $2.76 per 1,000 cubic feet.
Investors often buy gold when they're worried about market volatility, but they aren't doing that now. Gold fell $7, or 0.5%, to $1,329.50 an ounce. Silver fell 9 cents, or 0.5%, to $16.58 an ounce.
In other commodities trading, copper fell 3 cents to $3.19 a pound.
Among the biggest losers Tuesday was Tokyo's Nikkei 225 stock average, which slid 4.7%. Hong Kong's Hang Seng skidded 5.1%, South Korea's Kospi declined 1.5%. Germany's DAX and the CAC 40 in France both lost 2.3%. The British FTSE 100 index fell 2.6%.
The dollar fell to 109.33 yen from 109.70 yen. The euro fell to $1.2392 from $1.2399.
On Monday, the Dow finished down 4.6% and the S&P 500 sank 4.1%. The last fall of that size came in August 2011 when investors were fretting over Europe's debt crisis and the debt ceiling impasse in Washington that prompted a U.S. credit rating downgrade.
3:35 p.m.: This article was updated with closing prices, context and analyst comment.
1:15 p.m.: This article was updated with the close of markets.
10:55 a.m.: This article was updated with more recent market prices.
7:05 a.m.: This article was updated with U.S. indexes' movement and information about President Trump.
6:45 a.m.: This article was updated with the start of U.S. trading.