After starting the day deep in negative territory, and lingering in a neutral zone for much of the sessions, the Dow surged in the final 90 minutes of trading to end the day sharply up. It was a similar story on Germany's DAX, which was 3 percent lower at 12,308. The more domestically focused FTSE 250 index has declined 2.2 per cent, while the broader FTSE All Share index is showing a loss of 2.1 per cent.
Many in the markets had been anticipating some sort of correction following the steady gains over the past year or so, which have pushed some indexes, notably on Wall Street, to a series of record highs. Both of these things stoked fears that economic expansion and a prolonged share price rally could be derailed earlier than anticipated. "The market is a casino on steroids".
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"The market is probably trying to find a bottom", said Bill Lynch, director of investment at Hinsdale Associates.
He said it's important to understand that algorithms don't generally create the sort of steep declines we saw yesterday.
The Dow Jones Industrial Average rose 569.32 points, or 2.34 percent, to 24,915.07, the S&P 500 gained 46.31 points, or 1.75 percent, to 2,695.25 and the Nasdaq Composite added 148.36 points, or 2.13 percent, to 7,115.88.
"The reasons for the increase in rates is the stronger economy", said Ernie Cecilia, chief investment officer at Bryn Mawr Trust.
Qualcomm reported a 1.6% drop in its stock price after Broadcom raised its bid to buy the chip maker. "We're starting to see the beginnings of inflation and that means that rates are on the way up", the analyst said.
The plunge was a result of investors' fear of Federal Banks increasing interest rates due to a strengthened economy. Cryptocurrency's market cap jumped 7%, to $335 billion from its low of $310 billion, as stocks stumbled into their close.
This day hasn't gone down in financial history, however, and investors will hope there are more similarities between then and now - a day after the 4.6 per cent drop, the Dow rebounded 3.9 per cent. "I think the fundamentals are quite strong".
'The sell-off in the last few days is likely to reverse the trend, and potentially accelerate it further, particularly if investors start to unwind it over concerns that we could fall further, which seems likely if events in Asia this morning are any guide'. "Be disciplined no matter what the market environment, and keep saving and investing according to your long-term plan". Nearly nine year into the expansion that followed the Great Recession, the job market is strong. The dollar weakened to 108.81 Japanese yen.