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Dow falls more than 500 points, Nasdaq sheds 2.7% as January wild trading continues

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U.S. stocks fell Tuesday, a day after one of the biggest comebacks on record for the major averages.

The Dow Jones Industrial Average lost about 590 points, or 1.7%. The S&P 500 dropped 2.2%, while the tech-heavy Nasdaq Composite fell 2.5%.

The selling on Tuesday was broad with less than 10 stocks in the S&P 500 trading in positive territory.

General Electric was the biggest drag on the benchmark index with an 8.5% loss after the company topped quarterly earnings expectations, but missed revenue estimates. Home Depot fell 4.2%, Travelers dipped 3.8% and Nike eased 2.1%, weighing on the blue-chip Dow.

American Express was among the handful of gainers on the S&P 500 after an earnings beat, rising 3.7%.

The Dow on Monday rallied from a more than 1,100-point loss to close up higher and snap a six-day losing streak. The Nasdaq Composite reversed a 4.9% decline from earlier in the day to finish positive — its biggest rebound since 2008. The S&P 500 also rallied from major losses to close up.

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History shows a sharp intraday comeback for the Nasdaq Composite does not typically signal the end of the sell-off, but rather marks volatility seen at the start of a down period, according to Bespoke Investment Group analysis.

“I don’t think it’s done,” Liz Young, head of investment strategy at SoFi, told CNBC’s “Squawk Box” on Tuesday. “This … is a digestion process of a new environment that we’re not conditioned for.”

Even after Monday’s comeback, the S&P 500 is down 7.5% in January, on pace for its worst month since March 2020 at the onset of the pandemic.

The 10-year Treasury yield has climbed this year as the Federal Reserve tightens its monetary policy and prepares to hike interest rates. Investors have rotated out of high-growth areas of the market in favor of safer bets. The Nasdaq Composite is in correction territory, down 16% from its intraday record.

“Downside risks from monetary tightening are higher vs history. The pain has so far been localized to high valuation stocks, but signs of a broader risk-off are brewing,” Barclays’ Maneesh Deshpande said in a note Tuesday.

The Fed’s two-day policy meeting begins Tuesday as investors look for updates on when the central bank will raise interest rates and by how much. Market participants expect the Fed to signal a rate hike as soon as March and more policy tightening on the table to address high inflation.

Investors also monitored geopolitical tension at the Russia-Ukraine border. President Joe Biden spoke with European leaders Monday amid fears of a possible Russian invasion of Ukraine.

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