(CNN Business) – A day after increasing more than 1,000 points, the Dow fell on Thursday.
The index fell more than 600 points before recovering losses late in the afternoon. It was in positive territory at the end of the day, a 1.3% gain. The S&P 500 index rose 0.4% and Nasdaq rose 0.1%, after rejoining the bear market territory earlier that day.
The crazy session on Thursday came after Wednesday made huge profits in a market that had its worst December since the Great Depression. The Dow had its best profit point, and the S&P 500 and the Nasdaq published their best performance since March 2009.
But one day is not a trend. Anyone who is seeing actions this month knows that the feeling can be nothing. Nervous investors trying to decipher the market have seen bad omens virtually everywhere in recent weeks, and even the good news has rocked the markets at times.
The Dow has won or lost more than 350 points in seven of the last eight trading sessions. Thursday's would be eight out of nine. Those huge gains and (mostly) losses suggest that investors stay on the edge of Washington's economy, monetary policy, trade and dysfunction. December has been a very difficult time for investors.
"Human nature is very consistent: pain is the main motivator for change, and a 20% market decline in less than three months has the most tactical and historical indicators that suggest extreme pain," said Tony Dwyer, an analyst of Canaccord Genuity market, in a note to analysts.
The firm said investors should expect greater volatility and attributed the concern to "chaos in Washington," as well as the Federal Reserve's decision to abide by plans for gradual increases in interest rates despite recent turmoil. of actions. President Donald Trump, after breaking trade policies aimed at uniting global economies, has further destabilized markets by pointing out that he wanted to fire Federal Reserve president Jerome Powell. Trump appointed him in that position last year, but since then he has turned against him for raising rates.
The US economy remains strong, and most economists expect solid, although slower, growth in 2019. That is why some market analysts believe that stocks are oversold. The S&P 500 is 8% lower this year, while unemployment is near the lowest level in 50 years and GDP grew 3.4% in the third quarter.
But fear has taken over the stock market. Virtually every downward movement has precipitated another big wave of sales.
"Obviously, oversold can be best sold in a panic-based market environment," Dwyer said.
Markets that fall around 20% when the economy is strong usually recover. That is what happened in 1987 after Black Monday, in 1998 after the Russian debt crisis and in 2011 after the downgrading of the US credit rating. In 1987, the market skyrocketed 50% in the next two years. Shares recovered 20% within four months from their lows in 1998 and 2011.
The shares could return to new highs next year as they did this summer. Or this could be a warning sign of recession and a sign of worse news to come.