The Dow Jones Industrial Average eked out a 99-point gain Monday in a furious late-session rally after earlier falling as much as 1,000 points in a topsy-turvy day of trading.
Investors rushed out of stocks in early trade as fears over the escalating situation between Russia and Ukraine soured the mood on Wall Street, which already was looking toward a Federal Reserve meeting later this week in which officials are expected to lay out a more solid plan for increasing interest rates — a move likely to cool down the economy.
But then investors sniffed out good deals, market analysts said: beaten-down stocks that were relative bargains.
The S&P 500 index, the broadest measure of US stocks, had officially entered “correction” territory in the afternoon, which is defined as a 10% drop from its most recent high, as it fell by more than 3.8%. But by the close of trade Monday, it had gained about 0.3% to close at 4,410.
“Correction territory is often a psychological sweet spot for investors. They see the correction, and they see that it’s a healthy part of the markets,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
“When everything started selling off, that got a lot of people’s attention.”
Meanwhile, the tech-heavy Nasdaq index, which had been hit hardest earlier in the day — at one point logging a decline of nearly 5% — closed trading up more than 0.6% at 13,855.
The roller-coaster of a day came after US stock indices last week turned in their worst week since March 2020.
Market volatility has increased in recent weeks as investors brace for the Fed’s expected withdrawal of pandemic-era economic support, which has provided the cheap money to fuel bets on ever-riskier assets.
“There’s a short-term panic and part of that is the high level of uncertainty around what the Fed is going to do,” said Sylvia Jablonski, chief investment officer at Defiance ETFs.
The central bank is expected to provide a glimpse of its plan, including upcoming interest rate hikes, following a closely-watched policy meeting on Tuesday and Wednesday. Higher rates make borrowing more expensive for consumers and businesses.
The Fed is widely expected to hike rates at least three or four times in 2022, with the first hike projected for March. Over the weekend, Goldman Sachs warned clients the Fed could enact more than four hikes to curtail red-hot inflation.
Investors are also reacting to mounting fears that Russia will launch a military invasion of Ukraine, despite numerous warnings and threats of crippling sanctions from the Biden administration. On Sunday, the State Department told the family members of embassy staffers to leave Ukraine due to the ongoing military buildup.
“If it was just Ukraine by itself, people would ignore it but it is kind of icing on the cake today,” Gary Black, managing partner for the Future Fund, told Reuters. “It’s happening at the same time that people are worrying that the Fed is going to make a policy mistake and (that’s) just adding to the uncertainty.”
On Sunday, the State Department told the family members of embassy staffers to leave Ukraine due to the ongoing military buildup. Meanwhile, President Biden is reportedly considering the deployment of thousands of US troops to Ukraine as one of several options aimed at deterring Russian President Vladimir Putin.
The CBOE Volatility index, tracked as a measure of investor anxiety, hit its highest level since at least January 2021, according to Reuters.
Leading cryptocurrencies were mixed as some investors shed riskier speculative assets. The decline of leading digital currencies has coincided in recent weeks with plunges for tech stocks in recent days.
Bitcoin rose more than 4 percent to $36,845 after dropping by more than 5 percent earlier in the day, according to Coinbase.
The economic impact of the Omicron variant and future COVID-19 strains is another area of concern. Some 71 percent of small businesses owners has reported a drop in expected revenue due to the Omicron variant, according to a Goldman Sachs survey published Monday.
The latest market plunge — and then recovery — occurred as several blue-chip firms prepare to report earnings later this week. Microsoft reports earnings after the bell on Tuesday, followed by Tesla on Wednesday and Apple on Thursday.
One stock that largely avoided the earlier downdraft: the embattled Peloton, which rose nearly 10%. Earlier Monday, an activist investor group called on the embattled tech firm to fire its CEO and explore a sale.
Kohl’s was another outlier, motoring sharply higher on the day. Shares surged more than 36% on reports that multiple suitors are interested in buying the retailer.
With Post wires
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Dow closes up 100 points after falling as much as 1,000 on roller-coaster day - New York Post
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