Tuesday was a mixed bag for the Street as the S&P 500 index swung between losses and gains before regaining equilibrium with a late afternoon rally. Yesterday’s plunge was a short sharp shock that in its wake rattled markets worldwide.
The Dow Jones Index over 1,000-point fall was the most precipitous decline since August 2011 but given underlying economic fundamentals in the US remain strong, recent volatility is seen by analysts as a long overdue correction. It is also seen as a return to "normal" market behaviour with perhaps less of the froth and unlike what the bull market had been exhibiting that what goes up, can come down.
Valuations are stretched in equities eye-wateringly so and last Friday’s jobs report, which showed rising wages spooked investors, who became more wary of rising inflation and the potential for higher interest rates. The CBOE Volatility Index (VIX) placid over the last month had a one-day range on Tuesday between 22.42 and 50.30 (a 52-week high). At close, VIX as a measure of volatility, fell -20% to 29.88.
Today’s recovery means some are clearly buying the dip with materials and technology leading sector gainers. The Dow Jones Industrial Average jumped over 500 points up +2.22% led by DowDuPont up +5.97% and Home Depot up +4.33%. Tech giants Apple rose +4.18% and Microsoft climbed +3.78%. Boeing was up +3.66%. ExxonMobil fell -1.72%. Over on the S&P 500 which added+1.74%, TripAdvisor and Micron Technology led the winners up +14.65% and +11.37% respectively. Nasdaq gained +2.13%. Nvidia rose +5.56% and Broadcom +5.39%.