Stocks appeared to be headed for another rocky start and volatile trading day on Tuesday, as futures became negative on Monday night with the Dow futures down as much as 826 points and the S&P 500 futures down 76.5 just before midnight.
The Dow, based on the futures, was looking at opening with a decline of more than 1,200, but during the early morning hours Tuesday, futures pared some sharp declines.
At around 4:00 a.m. Tuesday morning, the Dow futures reversed some losses and showed a rise of 77 points, with both the S&P 500 and Nasdaq recovering as well. However, even with the change, the Dow was projected to open more than 300 points down.
On Monday, the S&P 500 fell by 113 points equal to a 4.1% fall, which was its worst trading day since August of 2011. Futures fell more during the earlier session by as much as 5.3%.
One Wall Street analyst said the best scenario would be for the market to open down, and then recover through large volume, which could help to create a turnaround and relieve some of the pressure that has been building.
However, he added that it was too early to tell if the highs for 2018 have already been seen, and too early to tell if a corrective of 10% off the highs is going to be enough.
Bonds have pressured stocks the last week, as yields have spiked with an expectation of higher inflation. That caused speculation to surface that the Federal Reserve could increase interest rate more than three times in 2018, which it forecasted.
However, on Monday Treasurys made a sharp reversal, with selling during the morning changing over to buying by investors that are worried about the stock prices taking a sharp drop. In a stunning and unusual turnaround, the 10-year Treasury yield, which is the bench mark, plunged from 2.88% to 2.70%.
On Monday, Jerome Powell, the new Fed chair, was sworn in. A big drop in the market is not unprecedented when a new Fed chair is sworn in. The S&P 500 dropped over 1% the day Janet Yellen was sworn in and 2% the day Ben Bernanke took over.
The expectation by most analysts is the market will be very volatile on Tuesday.