After the Dow fell more than 1,100 points on Monday, a historic one-day drop that sent stocks in Europe and Asia tumbling, US markets opened to a bumpy start on Tuesday.
The Dow fell by 500 points at market open on Tuesday morning, but quickly turned positive. Similarly, the S&P 500 and Nasdaq Composite Index opened down, but bounced up within the first half hour of trading. Yet by the end of the hour, they were down again.
After swinging wildly throughout Tuesday, at market close, the Dow ended up more than 560 points (a gain of 2.3%) for the day.
Dow closes more than 550 points higher after crazy market swings https://t.co/ErtDja9VdQ
Billionaire Carl Icahn called the financial markets a "casino on steroids" in an interview with CNBC on Tuesday and warned that it would "implode." However, he sees this week's volatility as the "beginnings of a rumbling" rather than "the beginning of the end."
Despite the whipsaw moves in the markets, economists were not particularly panicked, pointing to both a strong economy and company earnings as reasons for optimism. The markets also remain at levels well above where they were a year ago.
"In short, calm down. The economy is not going to collapse," economist Dean Baker at the Center for Economic and Policy Research, wrote. "If you have less money in your 401(k) than you did last week, just remember, you have far more than you expected to have last year."
"In short, markets felt frothy. A correction was waiting to happen," wrote Tim Duy, economist at the University of Oregon, in his newsletter Fed Watch. "Don’t panic just yet. Market declines do not appear tied to an earnings warning or recession threat (like 2015/206) nor are they sufficient to derail the expansion."
Treasury Secretary Steven Mnuchin said at a House Financial Services Committee hearing on Tuesday, "We are very focused on long-term economic growth, and we believe that the policies that we have enacted, including tax reform are very positive for long-term economic growth."
Still, investors will be keeping a careful eye on interest rates and the Federal Reserve, which swore in new chair Jerome Powell yesterday. "The Fed can cause a recession," said Mark Weisbrot, codirector of the Center for Economic and Policy Research. "That's what people should be worried about."