By Vivien Lou Chen and Mark DeCambre
The Dow industrials staged their first-ever 1,000-point-plus intraday U-turn to result in a gain, while other notable benchmarks also rallied in the final minutes of trading and reversed a sharp selloff.
Investors are awaiting an important two-day meeting of the Federal Reserve, the first of the year, that is set to kick off on Tuesday and could set the tone for the rest of what has been a brutal year for bullish investors.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.80% eked out a gain of 99.13 points, or 0.3%, to finish at 34,364.50. The index had been as low as 33,150.33 during the session, marking a 1,214.17-point turnaround. It is the first time in the Dow’s history that the index has closed positive after being down at least 1,000 points.
The S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.33% finished up by 12.19 points, or 0.3%, at 4,410.13 after having traded handily below the level that qualifies as a correction during the day. The index had been down by as much as 4% during the day, marking its biggest comeback in percentage terms since Oct. 23, 2008.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +1.77% closed up by 86.21 points, or 0.6%, at 13,855.13, snapping a four-day losing streak.
What’s driving markets
The final 10 minutes of trading saw all three major stock indexes close higher —capping a dramatic day of trading that began with markets in free fall Monday morning. At one point, Dow industrials were down by as much as 1,115.04 points amid persistent uncertainty and angst, ahead of Wednesday’s Federal Open Market Committee decision and a wave of earnings reports.
Monday’s early stock-market selloff “was a reflection of surprise and fear,” said Mike Zigmont, head of trading for Harvest Volatility Management in New York. “But despondency turned into optimism and potentially greed, and now investors are thinking about the profit opportunities instead of the risk of losses.”Volatility, whether observed or implied, has picked up “solely as a function of this cascading selling event that started this year, and came to a crescendo midday” on Monday, Zigmont said via phone. “A lot of it is trend-following, with computers that are doing the algorithms if the intraday path breaks downward. But it also works to the upside.”
Mark Hackett, chief of investment research at Nationwide, said that the market was being driven lower earlier in the day by three areas of concern: 1) fundamental deterioration in corporate earnings; 2) investor fear over Fed policies and geopolitical tensions; 3) investor sentiment starting to crack as technical levels breakdown for equity benchmarks.
Indeed, the S&P 500 fell into correction territory, dropping to as low as 4,222.62, but managed to avoid closing below the 4,316.90 level that would have marked an official correction. A correction is typically defined as a 10% decline from the index’s Jan. 3 record close, according to Dow Jones Market Data. Read: S&P 500 is close to a correction. Here’s the number it needs to avoid
Meanwhile, popular assets sank, with Netflix /zigman2/quotes/202353025/composite NFLX +0.90% shares finishing 2.6% lower after swooning on Friday, which contributed to investor concerns about corporate earnings and the economic outlook over much of the day.
The political environment also is a question mark with U.S. and European diplomats meeting on how they can respond to the threat posed by Russia to Ukraine. The Russian ruble /zigman2/quotes/210561610/realtime/sampled RUBUSD -1.1472% fell on Monday to the weakest level in more than a year.
“Investors are also probably reacting to some of the geopolitical tension between Russia and Ukraine, which is increasing the level of uncertainty,” said Dan Eye, chief investment officer at Fort Pitt Capital Group in Pittsburgh, which oversaw $5.3 billion as of December. “The volatility we’re seeing is normal. As the Fed pivots toward fighting inflation, we’re going to see an environment of more push-and-pull and drawdowns in the stock market than we’ve seen over the last two years,” Eye said via phone.