Investor angst was fueled by the arrest of a Chinese executive that further threatened progress on trade, coupled with omens of a recession in the bond market and a steep drop in oil prices.
At its low, the Dow Jones industrial average fell 784 points, or 3.1 percent. By the final hour of trading, it had clawed its way back and closed the day down 78 points, or 0.3 percent.
In a tremendous late-day rally, the tech-heavy Nasdaq pulled into positive territory, ending up 0.4 percent. And the Standard & Poor’s 500-stock index came back to finish down just 0.15 percent.
Investors seemed heartened by comments from JPMorgan Chase CEO Jamie Dimon and Christine Lagarde, managing director of the IMF.
“On the actual effects on the ground, you still have a strong economy,” Dimon said in an interview with CNBC. He stressed repeatedly that the economic fundamentals still look good.
Lagard said global slowdown fears are overblown. “It’s a little bit overdone — 3.7 percent forecasts for [global] growth is not bad,” Lagarde said, also on CNBC.
Markets also were buoyed by news reports that the Federal Reserve may delay an anticipated December interest rate increase.
Oil prices remained down, however. The Organization of Petroleum Exporting Countries began a crucial meeting Thursday in Vienna in hopes of agreeing on a production cut of 1 million barrels per day.
Oil prices are down 30 percent in the fourth quarter on overproduction across world producers.
Prices slipped further Thursday on fears that Saudi Arabia will not cut production enough to stabilize prices. Anything short of 1 million barrels per day would likely be disappointing for producers.
The big three oil producers are now the United States, Russia and Saudi Arabia. Saudi Arabia and non-OPEC Russia are key to reducing production.
International benchmark Brent crude dropped 2.1 percent overnight to $60.28 a barrel. U.S. West Texas Intermediate crude slid 2.3 percent to $51.66. Experts consider $50 as a key threshold because many producers cannot turn a profit if prices plunge much below that number.
The OPEC meeting Thursday apparently ended with no agreement and debate expected to continue Friday, when Russia is supposed to attend.
Investors were also spooked by something that hasn’t happened in a decade: the inversion of the yield curve. Typically, the interest rate on 5- and 10-year U.S. government bonds are higher than the interest rates paid for bonds of 3 years or less. Investors who are loaning the U.S. government money for a long time tend to want a higher interest rate for taking an extra risk. But on Monday the 3-year bond was yielding more than the 5-year bond, an unusual event Wall Street is viewing with concern.
Inverted yield curves usually mean a recession is coming, although not yet.
Investors are closely watching for when the 3-month yield climbs above the 10-year bond yield. That hasn’t happened yet, but is typically a more clear indicator of a coming recession than what has occurred so far. Still, investors are reading this week’s events as more confirmation that the U.S. economy has likely peaked.