By YURI KAGEYAMA
AP Business Writer
Tuesday's turnaround at the New York Stock Exchange ended with the Dow regaining 2.3%, about half of Monday's steep loss of 4.6%, the biggest point decline ever. Economists say the recent volatility in the markets could indicate a new norm for the coming year.
The U.S. market gains were reflected Wednesday in Asian markets as overseas shares saw a broad rebound on Wednesday, mirroring the bounce-back rally on Wall Street, though gains were in a modest range and most benchmarks gave up some gains after opening sharply higher.
Japan's benchmark Nikkei 225 index surged as soon as trading began as investors sought bargains, finishing morning trading up 3.1 percent at 22,270.56. South Korea's Kospi, which saw only modest losses on Tuesday, fell back by midday, losing 0.7 percent to 2,435.05. The Nikkei 225 tumbled as much as 7.1 percent on Tuesday before regaining some lost ground to close 4.7 percent lower. Australia's S&P/ASX 200 was up 1.0 percent at 5,889.60. Hong Kong's Hang Seng jumped 1.2 percent to 30,953.48, while the Shanghai Composite gained 0.1 percent to 3,376.36.
"There is something of a tug of war between the positives and the negatives and I think that's reflected in the volatility," said Gary Schlossberg, an economic analyst at Wells Fargo Asset Management in San Francisco.
Schlossberg says the positive view won out Tuesday as investors, who've enjoyed a bull run for 9 years, still see strong earnings and a strong economy that had pushed stock prices to record high levels.
"As some of the excess was wrung out of the market yesterday, the market was ripe for a refocus on some of the positives out there," said Schlossberg.
The negatives, however, have not gone away. Last week, former Federal Reserve Chair Alan Greenspan told Bloomberg News that he thought stocks were in "bubble" territory. There is also con prospect of higher inflation and higher interest rates around the corner which could put the brakes on the economy.
"It does appear that we have finally entered a period of increased volatility," says Jingyi Pan, market strategist at IG in Singapore, "This increased volatility had been one that the market was anticipating at the start of the year, but certainly took its time to arrive and may retain a spot in the market after this week's tumultuous turn."
The steep stock drops of recent days are also dredging up old fears about the underpinnings of the now 9-year-old bull market. It's the second longest on record, and the gains have been huge, with prices roughly quadrupling.
Tuesday was the busiest day of trading on the New York Stock Exchange since Nov. 10, 2016, two days after the presidential election. Throughout the turbulence, investors bought companies that do well when economic growth is strongest. Gainers included technology companies, retailers like Amazon and Home Depot, and industrial companies and banks.
"I think going forward while that volatility hopefully won't be as high as what we've seen in the past couple days, I think we can expect to see more of it because (interest) rates will be going up and that will create uneasiness among investors," said Schlossberg.
Danielle Williams, a Stanford University alumna, who has a good job working at Levi's San Francisco headquarters is one of those uneasy investors. She and others are worried by the market volatility and the potential for inflation in the already-expensive Bay Area.
"I'm a homeowner, I've lived in the Bay Area most of my life and I feel like prices for everything have gone up especially in San Francisco," said Williams.
Schlossberg says the outlook is good for the Bay Area, with its robust tech sector.
"The strength we've been seeing in California has pulled ahead once again of the national average, beginning late last year at least by the job numbers," said Schlossberg.
Bond yields reversed after a sharp drop Monday. As a result, the biggest losses went to high-dividend companies such as utility and real estate companies whose stocks become less appealing than bonds to investors seeking income. The yield on the 10-year Treasury note rose to 2.80 percent from 2.71 percent.
The Standard & Poor's 500 index, a broader market barometer tracked by many index funds, climbed 1.7 percent to 2,695.14. The Nasdaq composite rose 2.1 percent to 7,115.88.
The steep drops Friday and Monday wiped out the gains the Dow and S&P 500 had made since the beginning of the year. But the Dow is up 24 percent in the past 12 months the S&P 500 has gained 18 percent.
After Tuesday's rebound the S&P 500 is still down 6.2 percent from the record high it set on January 26. That's less than the 10 percent seen as a correction. Corrections are seen as entirely normal and even helpful in curbing excessive gains during bull markets. The last market correction ended almost two years ago.
Also Wednesday, U.S. crude oil added 60 cents to $63.99 a barrel in electronic trading on the New York Mercantile Exchange. It fell 76 cents, or 1.2 percent, to close at $63.39 a barrel in New York Tuesday. Brent crude, the benchmark for international oil prices, rose 54 cents to $67.40 a barrel in London.
In currency trading, the dollar fell to 109.32 yen from 109.54 yen late Tuesday. The euro was trading at $1.2384.
KTVU's Jana Katsuyama contributed to this report