published Feb 6, 2018 1:13:34 PM, by Sarah Ponczek and Kailey Leinz
(Bloomberg) —

U.S. equity indexes were down heading into the final hours of trading after a tumultuous morning that saw the Dow swing more than 900 points in 25 minutes.

The S&P 500 Index plunged as much as 2.1 percent at the open of trading Tuesday before regaining ground. The gauge swung between gains and losses of more than 1 percent each for the first time since 2015 and crossed the breakeven line at least a dozen times. The Dow declined more than 500 points before it, too, bounced back.

Trading volume in both was more than double the usual pace, while the benchmark for U.S. share volatility went through wild gyrations after hitting a two-year high.

Earlier, the Stoxx Europe 600 Index slumped the most since June 2016, and Japan’s Nikkei entered a correction as most of the shares on the 1,000-plus member MSCI Asia Pacific Index declined. Amid the sea of red, some safe-haven assets, including European bonds, traded higher. Treasury yields swung before nudging higher. The greenback declined after two days of gains.
What began with rising bond yields became a selloff across global equity markets late last week, as investors feared the return of inflation and higher rates that could erode profitability for companies already trading at elevated valuations. Traders are watching how the moves unfold from here — a sustained stock slump has the potential to undermine consumer and business sentiment, crimp borrowing and so start to curtail global growth.

“I think what you have is, this is a correction, not the start of an economic recession,” said Brent Schutte, chief investment strategist of Northwestern Mutual Life Insurance Co.’s wealth-management unit. “Corrections occur when people are positioned wrongly and have to position for the new environment. They can be sharp, but short.”
Earlier Tuesday, the Cboe Volatility Index, a gauge of implied volatility for the S&P 500 Index over the next month, breached 50 to touch its highest level since the aftermath of China’s devaluation of the yuan in 2015. Since then, it’s fallen as low as 22.42 before recovering to more than 40 and then sinking again to near its Monday close.
Elsewhere, oil declined and metals fell. Bitcoin traded around $7,200 after at one point sinking below $6,000 for the first time since October.

Here are some key events scheduled for this week:

Monetary policy decisions are due in Russia, India, Brazil, Poland, Romania, the U.K., New Zealand, Serbia, Peru and the Philippines. Earnings season continues with reports from Walt Disney, SoftBank, Sanofi, Philip Morris, Tesla, Rio Tinto, L’Oreal and Twitter. Dallas Fed President Robert Kaplan and New York Fed President William Dudley are among policy officials due to speak in Frankfurt and New York.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 0.7 percent as of 2:10 p.m. New York time. The Stoxx Europe 600 Index decreased 2.4 percent. The U.K.’s FTSE 100 Index dipped 2.6 percent. The MSCI Emerging Market Index sank 2.6 percent to the lowest in almost five weeks.

Currencies

The Bloomberg Dollar Spot Index fell 0.1 percent. The euro climbed 0.2 percent to $1.2394. The British pound advanced 0.1 percent to $1.3966. The Japanese yen declined less than 0.05 percent to 109.10 per dollar.

Bonds

The yield on 10-year Treasuries climbed four basis points to 2.75 percent. Germany’s 10-year yield declined four basis points to 0.69 percent. Britain’s 10-year yield fell four basis points to 1.521 percent, the biggest fall in almost five weeks.

Commodities

West Texas Intermediate crude dipped 1.2 percent to $63.36 a barrel. Gold fell 0.8 percent to $1,328.76 an ounce. Copper fell 1.3 percent to $7,076 per metric ton.

Terminal users can read more on the slide in stocks in other Bloomberg stories: Hedge Funds Now Look Prescient After Cutting Short-Vol Bets Volatility-Targeting Funds Could Sell $225 Billion of Stocks ‘Buy the Dip’ Takes Hold at Allianz to JPMorgan as Rout Deepens As Investors Raced to Hedge, ETF Options Trading Beat ETFs Volatility Jump Has Traders Asking About VIX Note Poison Pill VIX-Related ETPs Go Wild in After-Hours Trading After Rout VIX at 38 Is Waterloo for the Beloved Short Volatility Trade

–With assistance from Adam Haigh, Samuel Potter, Luke Kawa and Lu Wang.To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net ;Kailey Leinz in New York at kleinz1@bloomberg.net To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net Andrew Dunn, Todd White

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