The Dow Jones industrial average plunged a heart-stopping 1,500 points in afternoon trading on Monday before gaining back some ground - and finishing at 24,342, or down 4.6 percent - as volatility returned to the stock market with a vengeance after a year of rare tranquility.
The Dow's drop Monday was its biggest in terms of points, but it had a larger percentage drop as recently in 2011.
The S&P 500 dividend yield has been at around 2 percent for the past nine years, drawing investors looking for dependable returns.
"Global equity markets somewhat belated recognition of rising bond yields, along with fears that strong US jobs growth would prompt the US Federal Reserve to move more aggressively in rising rates, have combined to prompt the current market sell-off, in the absence of any fundamental factors that could derail the markets".
The pan-European FTSEurofirst 300 index lost 1.51 percent and MSCI's gauge of stocks across the globe shed 2.96 percent.
However, a rout in world stock markets, with US shares sliding more than 4 percent on Monday and Asian and European stocks following on Tuesday, arrested the sell-off in bonds for now. Since the start of the Trump administration, USA equities have increased by around 30 percent, adding more than $6 trillion to US household wealth. The yield on the 10-year Treasury slipped to 2.75 percent from 2.84 percent. Wall Street should be singing hallelujah, for rising inflation raises inflation expectations which spurs lifts in consumer spending in the here and now before the price of goods and services lift some more that, in turn, elevates sales, revenues and profits.
One of the changes that one would have thought would have induced the Fed toward a more aggressive monetary policy stance than it has been pursuing has been the strong increase in USA stock market prices.
Statistics Canada reports trade deficit grows to $3.2B in December
At the same time, the latest trade figures also reflect the rising value of commodity imports due to higher commodity prices. This makes it increasingly hard to meet Donald Trump's promise the country to reduce the gap between imports and exports.
Investors are also nervous about bond yields as the Treasury is due to significantly increase issuance this year to make up for declining Fed purchases.
In oil markets, Brent LCOc1 fell 0.86 percent to $68.09 a barrel and USA crude CLc1 dropped 0.76 percent to $65.07.
Stocks have been rising steadily since the election in part because the economy is so strong. If bond yields start to rise, investors will want to take some of their money out of stocks and put it into safer bonds. Both companies reported disappointing fourth-quarter results on Friday and are coming off their biggest losses in years. The euro slipped to $1.2399 from $1.2451. Gold XAU= was off at $1,334.92 an ounce after losing 1 percent on Friday. Now if you reverse PE (i.e. 1/24.53 or 4.07 per cent), you get what is called the earnings yield. Copper rose 3 cents to $3.22 a pound. According to Coindesk, the price of bitcoin fell 15 percent to $6,957. Many financial pros warn that bitcoin is in a speculative bubble that could burst anytime. They tumbled 18 percent to $6,950 on the Cboe.
Among stocks, Wells Fargo fell 9.5 percent in premarket trading after the Fed imposed new regulatory restrictions over compliance issues. Leading political parties in Germany, which is the largest economy in Europe, have struggled to form a government.
Japan's benchmark Nikkei 225 tumbled 2.6 percent and the South Korean Kospi shed 1.3 percent.
Contracts on Hong Kong's Hang Seng Index declined 1.3 percent.
ING lifted its year-end German Bund forecast by a modest 0.1 percent to 0.85 percent.