Summary

The roughly 2 percent rebound by the major domestic equity indexes on Tuesday followed the largest one-day selloff in more than six years. The vexing question is whether the volatility of the past two days was the start of a deeper move down or just clearing the way to the resumption of the aging bull market, which would turn nine on March 9.

Strong corporate earnings, including the stimulus from the 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.

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 the November 2016 election.

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.

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

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

The market’s pullback came amid concerns about rising bond yields and higher inflation. These were reinforced by Friday’s January U.S. jobs report that prompted worries the Federal Reserve will raise benchmark interest rates at a faster pace than expected this year.

There was speculation that Monday’s selling was spurred by automated programs and had called Monday’s session busy but orderly. The selloff as also attributed to the overnight slide in S&P 500 futures, the violent unwind of a trade betting on volatility in stocks staying low as the CBOE Volatility index chalked up its largest one-day increase in over two years on Monday.

SEC Chairman Jay Clayton said he “can’t really say” what caused the dramatic drop in stock prices during recent trading sessions, but that all signs indicate financial markets are functioning normally. U.S. Treasury Secretary Steven Mnuchin said recent volatility was not enough to rock market fundamentals.

Tuesday’s rebound came a day after a steep selloff that brought the largest percentage daily declines for the S&P 500 and the Dow since August 2011 and a near 1,600-point intraday loss for the Dow.

Approximately 12.3 billion shares changed hands on the major domestic equity exchanges and exceeded Monday’s volume of 11.7 billion shares.