US open: Stocks trading on either side of unchanged
Stocks on Wall Street are mixed, having recovered from another round of heavy losses at the opening bell, following a massive sell-off during the previous session, amid a spike in volatility and concern in some corners of the market regarding the likely pace of interest rate hikes by the Fed.
Some analysts also suggested that automatic trading and sharp losses in products dependant on low volatility might have been the chief reason behind the selling seen on Monday.
Commenting on the outsized moves in stocks and volatility, analysts at Morgan Stanley said: "While large one-day S&P drawdowns have historically been associated with higher-than-usual returns for equities and tighter spreads for credit in the subsequent 12 months, weakness tends to persist 3-6 months out.
"Two key takeaways are that 1) risk assets can remain soft in the short term, and 2) realised volatility in months subsequent to sell-off episodes trends higher than usual, even as implied volatility drops off after initial spikes."
Against that backdrop, as of 1644 GMT, the Dow Jones Industrial Average was trading higher by 0.01% or 16.69 points to 24,358.61, with the S&P 500 down by 0.33% or 8.62 points to 2,640.04 and the Nasdaq Composite lower by 0.04% or 3.22 points to 6,964.08.
Meanwhile, the VIX was off by 1.66% at 36.70, having seen wild swings thus far throughout the day.
At one point during Monday's session, the Dow Industrials suffered its largest point drop for a single day ever, alongside a record jump in the Chicago Board of Option Exchange's VIX volatility index.
US stocks had enjoyed record highs recently as investors welcomed President Donald Trump’s tax overhaul, but a strong non-farm payrolls report last Friday, which showed the best US wage growth in eight-and-a-half years, led some traders to conclude that the Fed might need to hike rates more quickly than previously anticipated.
Emmanuel Cau at JP Morgan chipped in: "Global equities did not experience any material weakness for nearly two years, valuations have become stretched and technical, positioning and sentiment indicators all flashed red in recent weeks.
"The unwinding of this extreme bullishness could have a bit more to go in the near term, but our view is that the medium term fundamental backdrop remains supportive and that one should indeed use the recent dip as buying opportunity."
With stocks roughly unchanged, Treasury prices slipped back again following Monday's rally, pushing the yield on the 10-year note up by five basis points to 2.75%.
By way of a guidepost, the consensus 2018 year-end forecast for the 10-year yield was 2.9%.
On the corporate front, Allergan dipped after it announced positive late-stage results for one of its migraine drugs and released its fourth-quarter earnings.
Elsewhere, Dunkin Brands was also a tad lower even as its fourth-quarter profit and revenue beat analysts' expectations, while Gartner was in focus as its fourth-quarter net profit beat views but sales fell a little short.
General Motors shares on the other hand were powering higher after reporting that cost-cutting and higher vehicle prices helped to offset a double-digit decline in sales volume during its fourth and final trading quarter