Quick Dips, 1% Days Are New Normal in Ever-Shifting 2018 Stocks

(Bloomberg) -- If you don't like the weather, wait a few minutes.

That's how it's been in the 2018 stock market, where the S&P 500 just rebounded from a 1 percent intraday loss for a third time this year. The turnaround followed three consecutive days of 1 percent declines, a stretch not seen since the start of 2016.

It's not just recoveries. Stocks erased gains of a similar size two different times last month. Altogether, the number of big reversals over the past nine weeks is comparable to the total number seen in the previous two years.

While it's tempting to portray recent turbulence as a return to normalcy, be advised: the S&P 500 is swinging around in a way that is beyond what is usually seen in bull markets.

Two months into the new year, the equity benchmark has notched 15 days in which it moved 1 percent or more in either direction. That's almost twice as many as in all of 2017.

At 36 percent of all trading sessions, the frequency of big days is higher than in all bull market years since World War II except one. That was 2011, when a downgrade of the U.S. sovereign rating sent the index to the brink of a bear market decline of 20 percent.

Gone are the calm days. In their place are lurches and rebounds, as investors reassess the durability of the nine-year equity rally. Lately, the prevailing direction has been down.

From surging inflation to the implosion of volatility-related products and the danger of a trade war, bad news keeps zapping stocks. Even the synchronized global recovery, a thesis that fueled the latest rally in equities, was called into question over the past week as manufacturing data from Europe to China to Japan signaled a cooling in expansions.

Add renewed uncertainty over monetary policy as Jerome Powell took the helm of the Federal Reserve, and it's not hard to see why the market is so excitable. The S&P 500 has changed 0.9 percent a day since January, triple the average from last year. Should the market volatility stay elevated, the spike in daily swings would be the biggest on record.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi, Richard Richtmyer

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