Broad swings rattled global trading on Tuesday, as the fallout from the oil-price collapse and the Russian ruble's plunge whipsawed markets and sent U.S. stocks to their third consecutive decline.
A volatile session began with stock markets in the U.S. and Europe sliding deep into the red. Indexes then staged a sharp recovery before faltering again by the time U.S. traders finished for the day.
The Dow Jones Industrial Average finished the day down 111.97 points, or 0.7%, at 17068.87. With Tuesday's declines, the Dow has lost 3% over the past three trading sessions. The 30-stock average has retreated in six of the past seven trading days.
Other markets saw sharp moves as well. Yields on U.S. Treasurys plunged as investors sought out safe havens, sending bond prices higher. Crude oil prices slipped, bounced and settled nearly unchanged, before slumping again after the close of regular trading following a bearish inventory report.
In the background, the Russian ruble fell 5.6% against the dollar, overwhelming efforts by Russian officials to curb the decline by sharply raising interest rates.
Traders said price swings weren't being driven by any one piece of news, but instead by investors scrambling to adjust to rapidly changing market dynamics set in motion by the fall in oil prices and the growing risk of financial instability in Russia .
Adding to investor jitters, the worries about Russia have revived memories of the turmoil that swept global markets after the country defaulted on its debt in 1998.
Although a falling ruble will make it harder for Russian businesses to repay external debt, a more flexible exchange rate has made this year's decline more orderly than in 1998. That could damp the aftereffects, analysts said.
Goldman Sachs Group Inc. this week started rejecting requests from institutional clients to engage in certain ruble-denominated trades, according to people familiar with the matter.
The moves, which the banks are deploying to protect themselves against further swings in the currency, have the potential to add to the strain on Russia's financial system.
"The rest of the world is on shaky ground," said David Ader , head of government bond strategy at CRT Capital Group LLC . That is prompting investors to move into a more defensive stance, he said.
"Investors are not willing to take new risk" in less-developed markets at the moment, he said. "They want to preserve capital and make fresh asset allocation decisions in January."
U.S. stocks started the day with modest losses, but the market ramped higher during the late morning as oil prices stabilized after days of declines. The Dow Jones Industrial Average was up as much as 247 points before noon.
However, traders said the jump in stocks was largely led by short-term players buying to reverse bets that stocks would fall. Buying interest by long-term investors was said to be light, and stock prices slid sharply in the final hour of trading.
"Buyers are patient, there's no rush," said Christian O'Brien , an equity trader in the New York office of financial-services firm Raymond James . Despite the recent declines, the Dow remains just 5% below its Dec. 5 record high.
The S&P 500 dropped 16.89 points, or 0.8%, to 1972.74. The Nasdaq Composite Index fell 57.32 points, or 1.2%, to 4547.83.
Those dynamics surrounding oil prices, which have lost 48% since its June high, and Russia , are taking precedence over a belief among many investors that the U.S. economy is on a healthier growth path.
"To the extent that there continues to be stress [on oil], it could be difficult for U.S. markets to perform well," said David Lefkowitz , equity strategist with UBS Wealth Management. "That said, the actual impact on the U.S. is going to be minimal."
And for the foreseeable future, many investors expect oil prices to be under pressure.
"Not only are we having an increase in supply, but we're having a decrease in demand" from previous estimates, said Oliver Sloup , director of managed futures at brokerage iiTrader in Chicago . "You look at Economics 101, and that's a terrible scenario."
The volatility in global markets isn't expected to deter the Federal Reserve from laying additional groundwork for raising interest rates next year. Investors expect the Fed to change its forward-looking policy statement at the conclusion of a two-day meeting Wednesday by removing language that it expects to keep interest rates low "for a considerable period."
European stocks recovered from early losses, with the Stoxx Europe 600 closing up 1.7% after losing 1.3% earlier in the session. The index fell 5.8% last week.
Haven assets gained. The yield on the benchmark 10-year Treasury note, used to price interest rates from mortgages and car loans to corporate bond issuance, fell to 2.07% from 2.117% a day before. It marks the lowest closing for the yield since May 2013 . When bond yields fall, their prices rise.
The previous closing low of the year was 2.09% on Oct. 15 , when the yield dipped below the 2% mark on an intraday basis.
The yen, another asset considered safe in times of turmoil, rose against the dollar.
U.S. crude oil futures swung between gains and losses during the afternoon. They settled up two cents at $55.93 a barrel. In postclose U.S. trading, futures fell to $55.50 following a fresh round of bearish private inventory data.
Min Zeng and Nicole Friedman contributed to this article.
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