By Joyce Yu
Philadelphia, PA–U.S. stocks traded in a wide range Tuesday as the major indexes tried to emerge from Monday’s sell-off. The Dow Jones industrial average continued to slip as much as 567 points on open before recovering is loss and soaring as much as 367 points at its high.
“At these levels, stocks represent pretty good value and we’re adding to equity exposure.” Ed Keon, portfolio manager at QMA, told CNBC. “It’s too early to call a bottom but he expects that the worse is over.”
Monday was just like any other day until the last hours when stocks went into free fall. The Dow dropped 1,175.21 points, having briefly declined more than 1,500 points during the session. The S&P 500 shed 4.1% and the Nasdaq fell 3.8%. What’s puzzling was there’s no particular piece of news that pushed major U.S. indexes deep into the red on Monday, leaving the only explanation as the recent moves in the bond market which have added volatility and concern to the market.
“This is a rather abrupt reminder of what volatility looks like. Nothing has changed in economic terms,” said Paul Donovan, global chief economist at UBS Wealth Management.
“The catalyst for the biggest U.S. equity sell-off for six years is being blamed on a delayed realization that inflation pressures are rising perhaps more quickly than anticipated,” James Knightley, economist at Dutch bank ING, told the Reuters. “As such, this appears to be more of a ‘healthy’ correction rather than the start of a broader re-evaluation for earnings.”
With Monday’s slide wiping $4 trillion off global share values, analysts remained cautious. “The one thing I could say with confidence is that volatility has suddenly come back into the market,” said Andre Bakhos, Managing Director at New Jersey-based New Vines Capital.
“The declines in markets are steep and vicious and are fostering a feeling of fear which begets irrational behavior. So this market is now driven on fear of rates and wages. That basically means good news now is bad news.”
The continued rally of U.S. stocks since 2009 has been fueled by the extraordinary easy-money policies of the world’s major central banks. With the Federal now well on course to raise rates back to pre-crisis levels, some investors think the market is over-stretched, despite healthy outlook of global and U.S. economies.
“I caution investors to really be patient here and look for opportunities and not to panic,” Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, said on CNN. “It’s really not a time to be worried about the long-term prospects of the market.”
