After two huge sell-offs in a row, stocks were all over the map Tuesday. Traders attributed the wild moves to a combination of interest rate fears, computer-driven trading and the obscure volatility funds that use leverage.
The Dow opened with a big whoosh lower, then rallied all the way back. The index closed 567 points higher and rose as much as 600 points at its high. At its session low it was down by 567 points, trading in a range of 1,167 points.
The S&P 500 added 1.74 percent, with tech as the best-performing sector. The Nasdaq gained 2.13 percent.
European markets fell. The German Dax dropped 2.3 percent, while the French CAC 40 fell 2.4 percent. In Asia, the Japanese Nikkei 225 plunged 4.7 percent, while the Shanghai composite pulled back 3.4 percent.
On Monday, the Dow dropped 1,175.21 points, having briefly declined more than 1,500 points during the session. Other major indexes closed sharply lower.
The sell-off kicked into action Friday after the latest nonfarm payrolls report and as interest rates in the U.S. jumped.
"We think this is an interruption [of the bull market] rather than the start of a bear market," said Craig Callahan, the founder of ICON Advisers. "We didn't see any of the typical conditions you get for a top."
The pullback came after a rip-roaring start to the year for stocks. The Dow and S&P 500 notched all-time highs as well as sharp gains for January.
"Widespread and excessive optimism left stocks vulnerable to increased volatility as bond yields have moved off their lows," said Bruce Bittles, a chief investment strategist at Baird. "While there is some early evidence that selling pressures are becoming exhausted, and stocks could soon see relief, the broad market is seeing meaningful deterioration."
While there was no particular piece of news that pushed major U.S. indexes deep into the red Monday, the recent moves in the bond market have added volatility and concern to the market. The benchmark 10-year yield traded around 2.75 percent Tuesday; it began the year trading near 2.4 percent.
The Cboe Volatility index — widely considered the best fear gauge on Wall Street — broke above 50 in early trading Tuesday before sliding down to 30.12. It closed at 37.32 Monday.
CNBC's Patti Domm contributed to this report