U.S. stocks bounce back a day after record dip

U.S. stocks rebounded Tuesday from the worst day in almost seven years with the best day in 15 months as investors poured back into some of the most beatendown sectors.

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. After numerous swings up and down, it wound up with a gain of 567.

Despite the turbulence, Tuesday’s trading looked similar to patterns that have shaped the market for the last year: investors bought companies that do well when economic growth is strongest. Gainers included tech companies, retailers like Amazon and Home Depot, and industrial firms and banks.

In Toronto, the bloodletting of Monday also stopped, but less dramatically, as the S&P/TSX composite index rose 29.12 points, or 0.19 per cent. The largest percentage gainer was cannabis firm Canopy Growth Co, which rose 19 per cent.

What began with rising bond yields became a sell-off across global equity markets late last week, as investors feared the return of inflation and higher rates that could erode profitability for companies already trading at elevated valuations.

Traders are watching how the moves unfold — a sustained stock slump has the potential to undermine consumer and business sentiment, crimp borrowing and so start to curtail global growth. “Based on where we stand relative to historic averages, there may be more pain ahead,” David Lebovitz, global market strategist at JPM Asset Management, said. “However, with economic growth solid, profits rising and central banks only normalizing policy at a gradual pace, it seems reasonable to expect that we will look back on this ... and not even remember what the initial plunge felt like.”

In Canada, analysts advised investors to remember that context is everything.

“The media sometimes fan the flames of an episode like this. Yes, this may have been the worst point decline in the history of the Dow, which was down as much at 1,600 points on Monday, but that’s only because it reached an all-time high value this year,” said Jason Heath, a financial planner with Objective Financial Partners in Toronto.