It’s been a wild two weeks on Wall Street after a historic period of calm.
The Dow is on track to start Thursday flat after five straight days of sharp declines at the opening bell. Dow futures had been deeply in the red but have since rebounded.
Wall Street is attempting to stage a lasting rebound from Monday, when fears about the bond market sent the Dow plunging a record 1,175 points.
But trading has been choppy, and the market has swung in wide ranges. The Dow surged 567 points on Tuesday, but a 381-point rally vanished on Wednesday after bond yields crept higher.
“Volatility shocks tend to take time to work off, so sharp moves intraday should still be expected,” analysts at Bespoke Investment Group wrote in a report on Thursday.
It’s a big shift from 2017 and the beginning of 2018, when the stock market went the longest period ever without tumbling. But such calm is unusual, and stocks overheated.
The yield on the 10-year Treasury bond ticked higher again on Thursday morning, to 2.86%. That’s a big spike from just 2.65% during the panic selling Monday afternoon.
The bull market has feasted on extremely low bond rates. The fear is that Treasury yields will rise to levels that make stocks less attractive and force the Federal Reserve to fight inflation by aggressively raising interest rates.
These worries briefly sent the Dow into a correction earlier this week, a 10% decline from recent highs. The fragile rebound lifted the market a bit, and the Dow and S&P 500 are now about 6% off their from all-time highs.
The stock market is still up dramatically since President Trump’s election. His promises for big corporate tax cuts helped lift the Dow more than 8,000 points, though it has since given back about a fifth of that surge.
The market performance also reflects the strong U.S. and global economies, which have boosted corporate profits. The job market remains healthy, as evidenced by a report Thursday that applications for unemployment benefits are at a 45-year low.