Dow sees its third 1,000-point swing in four days. Why volatility isn't over yet.

By Joy Wiltermuth

'It took one election and a poor Nvidia headline to go from D.C. being a tailwind to D.C. as a potential headwind,' says strategist

Stocks on Wall Street surged Monday, with the Dow logging its third swing of at least 1,000 points over four trading days - the most since the start of pandemic lockdowns in 2020.

Investors were back buying stocks like crazy on Monday, helping the Dow Jones Industrial Average log another swing of more than 1,000 points - its third such move in the past four trading days.

It helped that oil prices (CL00) (BRN00) tumbled on positive tones out of the Middle East and gas prices were back under $4 a gallon nationally on Monday, according to GasBuddy.

Nvidia shares (NVDA) fell more than 4% Monday, and were 22% lower from a month ago, according to FactSet data. But other parts of the artificial-intelligence trade were bouncing back, despite an investigation into Nvidia CEO Jensen Huang's relationship with a woman who reportedly worked as a foreign-intelligence asset for China.

That backdrop gave investors more confidence to pounce on stocks they like in the wake of Thursday's tech-led carnage, which wiped out several trillion dollars of market value from the S&P 500 SPX and Nasdaq Composite COMP.

"Last Thursday, the dam broke," said Chris Galipeau, head market strategist at the Franklin Templeton Institute. Any investors subject to volatility constraints, stop losses or margin calls experienced a "pretty good flush, especially in tech," he said Monday.

Yet the scope of Monday's rally was encouraging. There were 432 components of the S&P 500 that rallied, the index's highest number of gainers in a single trading day this year, according to Dow Jones Market Data. Industrials and consumer-discretionary stocks surged, as did tech, materials and real estate.

The S&P 500 also gained back $1.5 trillion in market value on Monday, its biggest gain since March 30, according to Dow Jones Market Data.

The Dow DJIA, meanwhile, hasn't seen this many 1,000-plus point day swings in so short a period since the start of the pandemic lockdowns in March 2020, according to Dow Jones Market Data.

Yet anyone hoping for calmer waters might have longer to wait.

"I think we will continue to see big moves from here, and I don't think the volatility has gone away," said Galipeau at Franklin Templeton.

A big reason for that would be more jitters around the AI buildout.

"You had a large tailwind for AI, as a whole, from Washington, D.C.," said Mike Treacy, head market analyst at Apex Fintech Solutions. "Now that the country has voted, and there has been a change in leadership [in Congress], it appears that the new leadership could serve as more of a headwind than the tailwind of the last two years."

On a positive note, the Cboe Volatility Index VIX, known as the stock market's "fear gauge," was back down closer to its historical average near 20 on Monday. That suggests potentially less stock-market volatility over roughly the next 30 days.

However, Treacy said a better gauge of tumult in stocks this year has been the Cboe Nasdaq Volatility Index XX:VXN, which tracks the Nasdaq-100 NDX, in contrast to the S&P 500-focused VIX.

"When you look at the VXN chart and how it's behaved this year, it's more representative of the volatility that's we've seen - both up and down," Treacy said.

To that end, with the VXN still near 34 after its huge spike last week, Treacy said he will remain on alert for more tumult until the gauge moves back down closer to its longer-run range near 25.

"It took one election and a poor Nvidia headline to go from D.C. being a tailwind to D.C. as a potential headwind," Treacy added.

-Joy Wiltermuth

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(END) Dow Jones Newswires

11-09-26 1653ET