Stocks rose in choppy trade Wednesday as Wall Street tried to build on the strong gains set in the previous session.
The Dow Jones industrial average climbed 200 points after opening 127 points lower. The S&P 500 rose 0.6 percent, with telecommunications as the best-performing sector. The Nasdaq composite gained 0.2 percent.
The latest moves come after three volatile sessions in which fear of rising inflation sent interest rates higher, pressuring equities. Traders also blamed computerized trading and sharp moves in obscure volatility funds that use leverage for the market’s recent swings.
“I think this bull market is basically in the process of forming a top,” Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, told CNBC’s “Squawk Box” on Wednesday. “This is the first crack of it.”
“Bull-market tops tend to be a process, not an event,” he said. “The reason why this is likely to play out this year is the trifecta which has been driving global stocks over the last 12-to-18 months as a big tailwind is now bound to turn into a headwind.” The trifecta Sharma refers to is better-than-expected global growth, weaker-than-expected inflation and loose monetary policy.
On Friday, the Dow and S&P 500 capped off their worst weekly performance in two years after a stronger-than-expected jobs report sent interest rates higher. The decline on Wall Street picked up steam on Monday, with the Dow plummeting 1,175 points as investors rushed for the exits in the wake of higher rates. On Tuesday, the 30-stock index swung 1,167.5 points before closing 567 points higher.
But despite Tuesday’s sharp close higher, the Dow is down 4.4 percent since Friday. The S&P 500 and Nasdaq, meanwhile, are down 4.4 percent and 3.8 percent, respectively, since then.
The Cboe Volatility index — widely considered the best gauge of fear in the market — has also been all over the map this week. On Monday, it more than doubled from 17.34 to 37.32. It also hit 50 on Tuesday before closing at 29.98. On Wednesday, it traded at 27.1.
A decline in stocks usually leads to a rise in volatility, but never like this. The latest spike in volatility could point to a big problem on Wall Street, some traders believe. Trading algorithms and levered fund products may have separated this market from past historical patterns, causing moves to be exaggerated.
In corporate news, earnings season remained in full swing Wednesday with Hasbro and Michael Kors reporting before the bell. Hasbro posted mixed results, with sales missing expectations. The stock rose nearly 3 percent after falling more than 4 percent in the premarket.
21st Century Fox, Tesla Motors, IAC/InterActive, Yum China and Yelp are expected to publish updates after the bell.
In economic news, Key members of the U.S. Federal Reserve are due to deliver separate remarks Wednesday. San Francisco Fed President John Williams is slated to appear in Honolulu, speaking at the Community Leaders Luncheon.