Financial markets seemed to have stabilized Tuesday, suggesting the repercussions from Monday’s frenzied selloff might be limited. 

The Nasdaq was up about one per cent in late-day trading, and the Dow by 0.76 per cent. Japan’s Nikkei ended the day up more than 10 per cent, its largest daily gain since 2008.

The S&P/TSX Composite Index was down 1.11 per cent on Tuesday, its first exposure to the volatility since the Toronto Stock Exchange and other Canadian platforms were closed Monday for a holiday. 

Despite a sharp decline when markets opened, the Composite Index and other individual stocks gradually improved or remained steady through the day. Some of Canada’s biggest stocks including Royal Bank of Canada, Canadian National Railway and Shopify ended the day only marginally down; Enbridge improved 0.34 per cent. 

Markets whipsaw: The volatility began late last week, when recession worries triggered a stock market rout in Japan that then spread to Europe, the U.S. and other regions. On Monday, major U.S. indices like the Dow, S&P 500 and Nasdaq nosedived as investors pulled out of everything from Big Tech to oil futures. The Magnificent Seven, a group of major tech companies including Apple, Amazon, Nvidia and others, shed around US$800 billion in value after their earnings triggered concerns about the prospect of returns on their massive investments in AI. 

Keep calm and invest on: Tuesday’s gains helped quell doomsday-level fears from Monday, as some analysts framed the ongoing volatility as a typical return to back to earth after an extended period of red-hot growth. 

“People are going to hate to hear this, but this is pretty normal,” BMO chief investment strategist Brian Belski told CNBC in an interview. 

While some of the market jitters are based on valid concerns about the state of the economy, Belski said, they’re also a result of the sort of herd mentality that tends to propel such downturns. 

“What’s going on in the market right now is a microcosm of what’s going on in society, he said. “We want to react first; it’s kind of ‘Fire, aim, ready.’”

An emergency cut? While Monday’s market carnage added fresh ammunition to arguments that central banks ought to cut rates faster than expected, in Canada the greater concern is rising unemployment levels, as the once-formidable labour market shows signs of cracking. 

In a note on Friday, before the turmoil, BMO analyst Doug Porter raised expectations for further BoC rate cuts. He now expects the bank to cut its overnight rate from 4.5 per cent today to three per cent by mid-2025. RBC analysts, citing unemployment numbers, also see increased chances of a cut.