Stocks fell on Tuesday, giving back some of the sharp gains made in the previous session, as wild market swings continued to keep Wall Street on edge.
The Dow Jones industrial average dropped 61 points after falling as much as 180.24 points. Verizon and American Express were the biggest decliners on the Dow, falling 1.4 percent and 1.3 percent, respectively.
On Monday, the major indexes closed sharply higher. The Dow jumped 410 points, while the S&P 500 and Nasdaq both popped more than 1 percent.
“This all goes back to the fact that we were overbought on Jan. 26, when we hit all-time highs, and then the next week we got one data point that spooked the market: wage growth,” said Marc Chaikin, CEO of Chaikin Analytics. “The market is spooked by inflation.”
A recent sharp rise in interest rates has sent jitters through Wall Street, as inflation fears raised worry that the Federal Reserve will have to tighten monetary policy faster than the market expects. These worries are reflected in a Bank of America Merrill Lynch survey, which showed professional investors slashed their bond allocations to their lowest levels in 20 years.
The benchmark 10-year yield hit a four-year high on Monday. It traded little changed at 2.853 percent Tuesday as investors looked ahead to the release of key inflation data.
The latest reading on the Consumer Price Index is scheduled for release Wednesday at 8:30 a.m. ET.
“Tomorrow will bring the most important CPI report in over 10 years, as rising inflation (which will cause higher interest rates) has become one of the biggest risks to this multi-year rally,” Tom Essaye, founder of The Sevens Report, said in a note Tuesday.
Stock-market volatility has roared back recently amid increasing inflation fears and the rise in interest rates. The S&P 500 has posted moves greater than 1 percent in six of the past eight trading days. For context, the broad index posted just eight 1 percent moves all of last year.
“Things are still volatile,” said Jeremy Klein, chief market strategist at FBN Securities. “However, as the skittishness abates, portfolio managers will have more comfort plowing their idle capital back into stocks. Yesterday’s classic ‘checkmark’ pattern reflected this burgeoning confidence.”
In corporate news, Amazon is reportedly ramping up its medical supply business, sending shares of hospital suppliers lower. Cardinal Health, McKesson and Owens & Minor all fell at least 2.3 percent.
Elsewhere, shares of AmerisourceBergen soared more than 11 percent after the Wall Street Journal reported that Walgreens Boots Alliance has reached out to the company about a takeover.
There are no major economic reports due Tuesday, but Cleveland Federal Reserve President Loretta Mester said the recent market rout is not impacting the central bank’s economic outlook.
“While a deeper and more persistent drop in equity markets could dash confidence and lead to a pullback in risk-taking and spending, the movements we have seen are far away from this scenario,” Mester said Tuesday.