US stocks are showing signs of recovery on Tuesday following a significant drop in the market on Monday. Dow futures are up 260 points, representing a 0.7% increase, while S&P 500 futures have risen by 0.9% and Nasdaq futures by 1.1%.
Despite this positive rebound, the S&P 500 has experienced a 6.8% decline over the past month, with the Nasdaq faring even worse with a 13% loss, placing it in correction territory. While the morning rebound is a welcome development, it does not signify a complete return to stability on Wall Street.
It is worth noting that such significant market selloffs are not uncommon occurrences. Although the Dow lost 1,000 points on Monday, marking only the 15th time this has happened, it does not rank among the top 100 worst days in market history when measured by percentage decline.
Another contributing factor to the current market volatility is the absence of many Wall Street investors who are on vacation, leading to thin trading volumes. This situation has exacerbated the volatility, as evidenced by the VIX volatility index reaching a four-year high on Monday.
Commenting on the market conditions, BMO Family Office's chief investment officer highlighted that the ongoing correction is a normal phenomenon, particularly during August, which historically tends to be a volatile period for markets due to reduced trading activity and the summer lull. Despite the recent turbulence, the underlying economy remains robust.
