What seemed like an epic rebound at the beginning of the session still suffered a historic rout, and the market continued the brutal sell-off triggered by President Trump's comprehensive tariff measures. This decline has lasted for four full trading days. During this period, the S&P 500 Index fell by 12.14%, the Dow Jones Industrial Average fell by 10.85%, and the Nasdaq Index fell by 13.26%.
Market data shows that as Trump continued to increase tariffs on China, the S&P 500 index's 4.05% intraday gain on Tuesday was all evaporated at the close, and finally closed down 1.6%, setting a record for the largest single-day gain since October 14, 2008 (the darkest period of the 2007-09 financial crisis).
According to statistics from Dow Jones Market Data going back to at least 1978, this is also the first time that the S&P 500 has risen by more than 4% during the session, but ended with a decline of more than 1%.
There is no doubt that the contrast encountered by US stocks in this round is not limited to the S&P 500:
The Dow Jones Industrial Average soared as high as 1,461 points (an increase of 3.85%) on Tuesday, but fell by more than 400 points at the close, marking the largest single-day intraday gain since April 2020.
The Nasdaq Composite Index, which is dominated by technology stocks, closed down 2.3%, erasing a 4.6% gain in early trading and setting a record for the largest single-day intraday gain since at least 1982.
Ian Lyngen, interest rate strategist at BMO Capital Markets, said, "Financial markets continue to be driven by trade war headlines, with tariffs on Chinese imports determining market trends on Tuesday. Despite positive news for risk assets, including progress in bilateral negotiations with South Korea and the White House's plan to prioritize trade negotiations with Japan, it was ultimately the Chinese tariff issue that caused the stock market to give up most of the day's gains."
How volatile are U.S. stocks currently?
The current high volatility and high risk of U.S. stocks have undoubtedly reached a level that has stunned many market participants:
Over the past 10 trading days, Bitcoin’s realized volatility index was 43.86, below the S&P 500’s 47.29 and the Nasdaq 100’s 51.26. In other words, the U.S. stock market is now more volatile than Bitcoin, which has been highly volatile for a long time.
At the same time, the CBOE Volatility Index VIX, known as the "fear index", has fluctuated by more than 20 points for the second consecutive trading day. As of Tuesday's close, the VIX index closed at 52.24, the highest level since the epidemic bear market in April 2020.
Not only has the VIX, which calculates the S&P 500's 30-day expected volatility based on the value of options contracts, soared, but so has the VVIX, known as the "volatility index," which jumped above 170 at Tuesday's close, the highest level since the volatility shock in early August, signaling growing industry demand for VIX options to hedge against broader market swings.
Rocky Fishman, founder of research firm Asym500, said looking solely at actual volatility may even underestimate the extent of intraday market turmoil.
All these signals of turmoil in the U.S. market have forced many investors to once again think about that extremely confusing question: Is U.S. President Trump really willing to risk a stock market crash and economic recession to reshape global trade?
“The path forward is only going to get murkier,” Andrea DiCenso, co-portfolio manager of the Sayles & Company Alpha Strategies team at Loomis, said at a media event. “We are all at the mercy of the decisions of one man (Trump).”
Que Nguyen, chief investment officer of equity strategy at ResearchAffiliates, noted, “Currently, there is a coward’s game going on between the market and the Trump administration.”