Wild ride continues for North American stocks in volatile trading

North American markets swung wildly between positive and negative territory on Tuesday in volatile trading after Wall Street's rout yesterday heightened concerns that a pull-back from record highs could lead to more heavy losses.

The benchmark Dow Jones industrial average was up 0.3 per cent, or 66 points, to 24,412 in early afternoon trading after losing about 500 points at the opening of trading.

It had lost 1,175 points or 4.6 per cent yesterday — marking its largest daily points drop in its history.

But Benjamin Reitzes of BMO Capital Markets highlighted in a note that while the points decline was a record, "on a percentage basis, it's the 28th largest drop since 1947."

Meanwhile, the S&P 500 gained 0.3 per cent to 2,657 points. Yesterday, it lost 4.1 per cent, which was its biggest daily percentage drop since August 2011.

Both the Dow Jones industrial index, which consists of 30 big U.S. firms, and the S&P 500, which is considered a broader market barometer, had erased their gains for this year on Monday.

The tech-heavy Nasdaq composite was up 0.2 per cent to 6,985. All three benchmark indexes had opened lower.

Shares of tech giant Apple boosted the Nasdaq, rising over two per cent in the afternoon. Shares of high-dividend paying companies in utilities and real estate were among the biggest losers.

Reitzes said that fundamentals certainly were not driving the "market turmoil." 

"The only data point of the day showed the U.S. non-manufacturing sector started 2018 in robust health," he said.

"Indeed, while the sharp drop in equities could act as a bit of a headwind for growth, investors should be encouraged by the continued strength in the economic backdrop." 

Volatility and bonds

The CBOE Volatility index, known as the VIX, which is considered the best gauge of fear and volatility on Wall Street, surged on Tuesday to its highest level since August 2015.

On Monday, the VIX had its biggest one-day jump in more than two years.  

Will Delwiche, strategist at Robert W. Baird told Reuters that the "choppiness" in trading today is markets trying to figure out where we should be.

"Some of what we saw yesterday suggests we are near at least a short-term low," he said. "Then the question is what the rallies look like after that."

Meanwhile, investors continued to rush to the safety of government bonds. The yield on the 10-year Treasury note rose to 2.86 per cent — hitting four-year highs again.

As interest rates rise, the value of existing bonds falls, and borrowing to invest becomes more expensive.

Canadian market

Canadian shares continued to decline with its longest stretch of losses since January 2016.

In Toronto, the S&P/TSX composite index was lower by 0.3 per cent at 15,283 points — marking its seventh consecutive day of declines.

The market had closed down 1.7 per cent on Monday, hitting its lowest level since mid-September.

Shares of Canada's big banks were among the biggest losers during the market rout with Toronto-Dominion Bank down 0.6 per cent, and Royal Bank lower by 0.5 per cent. 

Health-care stocks staged a recovery as the biggest gainers on the index, led by marijuana producers.

Shares of the country's biggest marijuana producer, Canopy Growth, were up more than 10 per cent.

Commodities and currencies

Oil prices also weighed on the index, with benchmark U.S. crude down 0.5 per cent to $63.81 per barrel.

The Canadian dollar was trading at 79.79 cents US, down from Monday's average price of 80.11 cents. The loonie has fallen almost 1.3 per cent against the U.S. dollar since Friday.

The greenback was higher against most major global currencies as investors flocked to its safe-haven appeal.

Another safe haven — gold — was up for the fourth day in the last five, to $1,331.30 US an ounce.

Around the world

Overall, global markets have lost some $4 trillion US as the benchmark MSCI's 47-country world index fell nearly eight per cent since Friday.

Asia's biggest market — Japan's Nikkei 225 Index — lost 4.7 per cent, while Hong Kong's Hang Seng plunged over five per cent.

Even mainland China's Shanghai Composite was not immune to the rout after closing higher on Monday. It lost 3.4 per cent.

In Europe, the benchmark Stoxx 600 closed down 2.3 per cent after dropping to its lowest level in six months.

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