The wild swings in prices over the last two days have been the most extreme since the financial crisis. The benchmark Standard & Poors 500-stock index surged as much as 2.9 percent on Tuesday, but ended down 1.4 percent.
The resurgence of volatility has overturned a sense of comfort among many investors who had grown accustomed to calm markets and steadily rising stock prices in recent years.
While the market turmoil may not yet be flashing warning signs about the United States economy, which still appears to be strengthening, it is pushing investors to take a closer look at their portfolios. Stock prices have generally been rising faster than the profits of corporate America, and that is prompting caution. Even after the recent downturn, investors are still paying more for corporate profits than they have on average over the last 10 years.
Continue reading the main story The Dow Minute by Minute Position of the Dow Jones industrial average at 1-minute intervals on Tuesday.
The last two days have been a wake-up call for a lot of portfolio managers, said Nicholas Colas, the chief market strategist at Convergex, an institutional brokerage firm. It forces everyone to reconsider their base assumption for things like earnings growth and revenue growth.
The opening of trading in Asia on Wednesday brought little clarity. Shanghai stocks, which have led the declines over the past few days, swung between gains and losses, and the volatile trading spread across the rest of Asia. Japanese stocks rebounded from Tuesdays 4 percent drop, but shares in Australia were down.
Some investors have taken a dark outlook, questioning whether the markets and the broader economy will be able to abide a coming rise in interest rates that the Federal Reserve has been moving toward for months.
For the time being, there are few doubts that the American economy has been growing, and the economy is unlikely to be significantly hampered by recent turmoil in China. New data reported on Tuesday morning pointed to a healthy increase in consumer confidence in August and a rise in new home sales in July.
But voices like Lawrence H. Summers, the former chief economic adviser to President Obama, have recently joined a chorus of skeptics arguing that the growth may not be able to continue if the Fed steps back from the market, as it had looked set to do in September. Investors have ramped up bets this week that the Fed will have to delay any planned changes in interest rates.
Tuesday provided another reminder of the wide range of outcomes that investors are debating.
Early on Tuesday, investors in markets around the world appeared to take comfort as China, the epicenter of the recent sell-off in global stock markets, took steps to tackle slowing growth in the worlds second-largest economy. The Chinese central bank announced measures intended to lower borrowing costs and stimulate the economy.
Continue reading the main story A Tumultuous Time As the market rout in China continued on Tuesday, stocks around the globe remained https://storify.com/RobDomankoHSBC/robert-domanko-hsbc
