Stock markets broke their single-day record for volatility Monday, having the largest turnaround in 13 years, multiple sources reported.
The Dow Jones Industrial Average dropped over 1,000 points Monday before spiking up over nearly 100 points at the close, erasing all losses for the day, Fox Business reported. The Nasdaq dipped nearly 5% before a huge rally to close up 0.6%, The Wall Street Journal reported.
Monday’s selloff began as investors considered Federal Reserve policies yielding rising interest rates to combat surging inflation before the central bank’s meeting Tuesday. The Fed is expected to announce its plan to increase interest rates and reduce its nearly $9 trillion bond portfolio, the WSJ reported. (RELATED: Crypto Market Sees $130 Billion Sell-Off Over Last 24 Hours)
BREAKING: Dow slides more than 580 points, S&P 500 and Nasdaq plunge more than 2% as stocks sell-off againhttps://t.co/MowIiIp83w pic.twitter.com/JXKKTr8Gh6
— CNBC Now (@CNBCnow) January 25, 2022
Short-term bond yields also dropped, showing that some investors think the Fed may be less aggressive in raising rates, according to the WSJ. The yield on the two-year Treasury note closed the day at 0.95%, a decrease from Friday’s 0.993%.
Meanwhile, the yield on the 10-year Treasury note increased Tuesday to 1.785% from Monday’s 1.735% as investors see more safety in Government debt, the WSJ reported. Bond yields move in an inverse direction from bond prices.
Growing global tensions also contributed to Monday’s turbulent market with fears growing of a possible Russian invasion of Ukraine, the WSJ reported. An invasion of Ukraine could lead to the closure of the U.S. financial system in Russia and disrupt the global markets, Sebastien Galy, a senior strategist at Nordea Asset Management, told the WSJ.
“The closer you get to the cliff, the more nervous [the market] is,” Galy said.
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