Dow turns back negative, trades in wild 934-point range

U.S. stocks traded in a wide range Tuesday as the major indexes tried to recover from a recent steep sell-off.

The Dow Jones industrial average traded 61 points lower after rising as much as 367 points. The index also fell as much as 567 points at its session low.

The S&P 500 traded just above breakeven with information technology as the best-performing sector. The Nasdaq composite rose 0.1 percent. Both the S&P 500 and Nasdaq fell sharply at Tuesday's open.

"I thought we were going to see the bottom within five minutes of when we opened. I think that's basically what we're seeing," said Ed Keon, portfolio manager at QMA, the quantitative and dynamic asset allocation business of PGIM. "At these levels, stocks represent pretty good value and we're adding to equity exposure." Keon said it's too early to call a bottom but he expects that the worse is over.

European markets fell, but traded off their lows. The German Dax dropped 1.3 percent, while the French CAC 40 also fell 1.3 percent. In Asia, the Japanese Nikkei 225 plunged 4.7 percent, while the Shanghai composite pulled back 3.4 percent.

On Monday, the Dow dropped 1,175.21 points, having briefly declined more than 1,500 points during the session. Other major indexes closed sharply lower. The sell-off kicked into action on Friday, after the latest nonfarm payrolls report saw interest rates in the U.S. jump.

This pullback came after a rip-roaring start to the year for stocks. The Dow and S&P 500 notched all-time highs as well as sharp gains for January.

"Widespread and excessive optimism left stocks vulnerable to increased volatility as bond yields have moved off their lows," said Bruce Bittles, chief investment strategist at Baird. "While there is some early evidence that selling pressures are becoming exhausted, and stocks could soon see relief, the broad market is seeing meaningful deterioration."

While there was no particular piece of news that pushed major U.S. indexes deep into the red on Monday, the recent moves in the bond market have added volatility and concern to the market.
The benchmark 10-year yield traded around 2.74 percent on Tuesday; it began the year trading near 2.4 percent.

The Cboe Volatility index — widely considered the best fear gauge on Wall Street — broke above 50 before sliding down to 25.17. It closed at 37.32 on Monday. The surge in volatility also triggered massive selling in other volatility instruments.

—CNBC's Patti Domm contributed to this report

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