Tuesday's wild trading session saw the Dow swing more than 1,100 points from its low to its high and ended with the benchmark S&P 500 tallying its best day since just before President Donald Trump's November 2016 election.

Traders celebrate after the closing bell on the floor of the New York Stock Exchange, (NYSE) in New York, February 6, 2018.
Traders celebrate after the closing bell on the floor of the New York Stock Exchange, (NYSE) in New York, February 6, 2018. (Reuters)

Shaken out of many months of calm, Wall Street braced for a higher level of volatility in the days ahead, after a roughly 2 percent rebound in US stocks on Tuesday followed the biggest one-day selloff in more than six years.

Bulls argue that strong US corporate earnings, including a boost from the Trump administration's tax cuts, will ultimately support market valuations. 

Bears, including short sellers that bet on the market decline, say that the market is over-stretched in the context of rising bond yields as central banks withdraw their easy money policies of recent years.

"The markets went into being religiously over-bought to deeply over-sold in a matter of four trading days," said Adam Sarhan, chief executive of 50 Park Investments, an investment advisory service. 

"New buyers are showing up, who were waiting for the prices to go down."

TRT World spoke to Nick Harper in New York.

Tuesday's wild trading session saw the Dow swing more than 1,100 points from its low to its high and ended with the benchmark S&P 500 tallying its best day since just before President Donald Trump's November 2016 election.

"I don’t think the volatility is over," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. "These types of moves tend to take about three weeks to get through the system ... and volatility just doesn’t suddenly settle down."

White House says 'very comfortable' with economy

The White House is "very comfortable" with where the economy is, despite recent stock market volatility, a White House spokeswoman said on Tuesday.

"Look, the economy is incredibly strong right now. The president's focus continues to be on the long-term economic fundamentals which ... are very strong in this country," White House spokeswoman Sarah Sanders told a regular news briefing when asked about recent volatility

"... There's nothing that's taken place over the last couple of days in our economy that's fundamentally different than it was two weeks ago and we're very comfortable with where we are right now," she added.

"Buying the dip"

Investors were eyeing the recent steep slide as an opportunity, an extreme example of the "buying the dip" that has symbolized the market's steady climb to record highs.

"We’ve been looking at this as an opportunity to incrementally add a little bit of risk - not get over our skis, but a little bit," said Erin Browne, head of asset allocation at UBS Asset Management in New York.

During the trading day, stocks swung from negative to positive after indexes started the session 2 percent lower. The S&P 500 ended 6.2 percent below its January 26 peak.

The sharp declines in recent days marked a pullback that had been long awaited by investors after the market minted record high after record high in a relatively calm ascent.

The Dow Jones Industrial Average rose 567.02 points, or 2.33 percent, to 24,912.77, the S&P 500 gained 46.2 points, or 1.74 percent, to 2,695.14 and the Nasdaq Composite added 148.36 points, or 2.13 percent, to 7,115.88.

After the end of regular trading on Tuesday, S&P 500 e-mini futures were down 0.4 percent.

Technology, materials and consumer discretionary were the top-performing sectors on Tuesday. 

Defensive sectors utilities and real estate were the only major S&P groups to end negative.

Apple climbed 4.2 percent, while Microsoft and Amazon gained 3.8 percent each.

The US stock market has climbed to record peaks since Trump's election on the prospect of tax cuts and corporate deregulation as well as optimism over corporate earnings.

The S&P 500 remains up 26 percent since his election, and on Tuesday clawed back into positive territory for 2018, up 0.8 percent.

Source: Reuters