On a wild day on Wall Street, stocks ended the day with a surprise turnaround just before the closing bell. Shares started the day with strong selling.
US stocks opened in the red as investors worried about the Federal Reserve's interest rate hike, tensions in Ukraine, earnings season and -- of course -- inflation plans.
At the low point of the session, the market was on track for its worst day since October 2020, with the Dow down more than 1,000 points.
But with just minutes to go into the trading session, the major indices reversed course and turned green. The Dow closed up 0.3%, or 99 points.
What on Earth happened to turn things around? The sell-off may have just gone a little too far.
"Investors can be a little pessimistic about the growth outlook," Oanda's senior market analyst Edward Moya said in the late afternoon.
The S&P 500 (SPX), the broadest measure of the US stock market, also closed with a gain of 0.3%. During the session, the index was on a correction track. But that didn't mean it, at least not on Monday: Last week, it recorded its worst week since March 2020.
The Nasdaq Composite (COMP), which entered correction territory last week, closed up 0.6%.
The day's volatility was also visible in the CBOE Volatility Index (VIX), or VIX, which rose during the day but ended the session "only" 3.2% higher.
CNN's Fear and Greed Index still showed fear Monday afternoon, but the level was slightly less severe than Friday.
JJ Kinahan, chief market strategist at TD Ameritrade, said each day last week, stocks underperformed in the last hour of trading, which bodes well for the next day.
"Following a tough start for stocks in 2022, investors are looking for reasons to expect a rebound," Jeff Buchbinder, equity strategist at LPL Financial, said in emailed comments.
"After doubling pandemic levels in March 2020, without falling more than 5% in 2021, stocks probably needed a break," he said. "However, it doesn't make this dip feel any more comfortable."
A lot to digest
Investors also have a lot to offer this week.
Earnings season has moved to big tech, including Microsoft (MSFT), IBM (IBM), Intel (INTC) and Apple (AAPL), reports this week.
Then there's the Fed meeting, which will conclude with Wednesday's policy statement and the press conference that follows. According to the CME Fedwatch tool, as of Monday morning, market expectations for this week are that the central bank will keep interest rates near zero for a while. But for the next meeting, which is not until March, expectations for a quarter-percentage-point rate hike were close to 90% on Monday afternoon.
Expectations are part of the game. The Fed could also conclude that inflation has gotten too hot in late 2021 and could crank rates more -- or sooner.
The Treasury yield, which tracks interest rate expectations, was off Monday's high last week but turned higher in the late afternoon. Last week, 10-year bond yields were up around 1.76% after climbing 1.8% for the first time before the pandemic.
While the Fed is trying to tame inflation by normalizing its pandemic-era policies, the US economy is grappling with a fallout from the Omicron version. According to the IHS Markit Flash Composite Purchasing Managers' Index, US private sector production growth slowed in January as the highly contagious variant put more pressure on an already poor supply chain and existing labor shortages.
Making matters worse, investors are eagerly watching the situation in Ukraine as there are fears that the country may be invaded by Russia.
News that the United States and the United Kingdom are withdrawing some staff from local embassies isn't exactly creating confidence that the situation will be resolved quickly and European stock markets are also down sharply.
Commodity markets are feeling the pressure of rising tensions and analysts expect oil prices to rise if the situation escalates. However, US oil prices fell 2.1% to $83.31 a barrel on Monday afternoon.