ARI SHAPIRO, HOST:
The dramatic swings we've been seeing in the markets since late last week kept going today. Here's what was happening early this morning before U.S. markets opened.
(SOUNDBITE OF MEDIA MONTAGE)
UNIDENTIFIED REPORTER #1: We've got some breaking news. A global market sell-off is in the works right now - sharp drops in Asia and Europe overnight.
ERICA HILL: Futures pointing to what could be another wild day.
UNIDENTIFIED REPORTER #2: And if you were looking for relief this morning, you are not going to get it, at least not yet.
(SOUNDBITE OF NEW YORK STOCK EXCHANGE BELL)
AILSA CHANG, HOST:
When Wall Street opened at 9:30 Eastern, the Dow was down more than 500 points. And not much later, it was shooting up by 300-some points. There was a lot of hedging going on throughout the day.
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UNIDENTIFIED REPORTER #3: Look; it's anybody's guess as to what happens from here.
UNIDENTIFIED REPORTER #4: Maybe this was a necessary evil in the market, and it'll probably settle in at some point.
UNIDENTIFIED REPORTER #3: Most investors probably shouldn't be paying attention to each little movement in this stock market.
SHAPIRO: But it was hard not to watch the movement. Treasury Secretary Steven Mnuchin kept his eye on things as he testified before a House committee.
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STEVEN MNUCHIN: I normally wouldn't be looking at my iPhone, but...
CHANG: At the same time, he also told lawmakers he wasn't too concerned about the market volatility. He said the fundamentals are, quote, "quite strong." Then he was asked whether the Trump administration, which has taken credit for market gains, would take credit for market losses.
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MNUCHIN: I think we'll still claim credit for the fact that it's up over 30 percent since the election.
SHAPIRO: And then when markets closed today, it was on an up note. The Dow ended the day nearly 570 points higher. That's about 2 percent, a change from yesterday when it was down more than 1,100 points. Joining us now is NPR's Jim Zarroli Hi, Jim.
JIM ZARROLI, BYLINE: Hi.
SHAPIRO: So we've had several days in a row now of wild price swings in the stock market - any signs that things will calm down?
ZARROLI: Not so far. I mean, this was just a absolutely crazy day. I mean, stocks just bounced around all day. We started with a plunge in the Dow. Then it was up. Then it was down. There was a 1,200-point swing in the Dow - in other words, from the low to the high - 1,200 points.
SHAPIRO: One thing that's happened this week is a spike in something that is called the VIX index - V-I-X. Explain what that is and why it's important.
ZARROLI: The VIX is a measure of how volatile the markets are, and the reason that is important right now is because there are a lot of these very complex financial instruments that let investors bet against the VIX. In other words, when the market is calm and volatility is low, they go up. And when the market is volatile like it was today and yesterday, they go down.
And these have become a lot more popular over the past few years. Investment funds buy them. There have been estimates that there are a trillion and a half dollars' worth of these all over the world. And so this has led to some really steep losses this week, and there's a lot of speculation that it's responsible for some of the turmoil we're seeing in the markets.
SHAPIRO: Do you mean that just by investing in the VIX, they could be creating wider swings than we would otherwise see.
ZARROLI: Right because these can cause really heavy losses.
SHAPIRO: Stocks had been doing so well for so long. Do you think this volatility puts all that at risk?
ZARROLI: We'll see. I mean, it's important to remember swings like these are not unusual. Even a swing of 5 percent in the Dow - that was pretty common a few years ago. We're - we've just had a period of real stability in the markets - just steady growth, low interest rates, you know? So I think a lot of people maybe have just forgotten that risk is part of what you get when you invest in the markets.
Now, something has changed at this point. We had Friday's jobs report. It showed that job growth was pretty good and that - more important, that wages are rising. And that's just gotten some people to wonder if the economy is overheating, if we're going to see more inflation. And that's made investors think that interest rates could be rising.
SHAPIRO: Another big change is that the big stock law that Congress passed is in effect. Could that be any kind of a factor in the volatility that we're seeing right now?
ZARROLI: You know, it's impossible to know, but it is a question being posed right now. I think the tax bill was supposed to stimulate the economy, boost growth. Now, you - it's one thing to do that in a recession, but we're in a - you know, nearly a full employment economy in the opinions of a lot of economists, anyway. So, you know, what happens when you stimulate an economy that's already stimulated? You can cause it to overheat.
SHAPIRO: And what about that statement we heard a few minutes ago from Treasury Secretary Steve Mnuchin that he's not worried about the markets and the fundamentals of the economy are strong? What do you make of that?
ZARROLI: Well, the administration is in a very difficult position now because of course President Trump has been bragging a lot about the rising stock market. And that's something presidents don't do because, you know, what goes up can come down. And the moves don't always correlate directly with where the economy is. It's a very imperfect barometer of economic growth.
So if you boast about the market going up, you kind of have to answer for it when it goes down. So what they're saying now is, you know, pay no attention to these swings; they don't really matter. The fundamentals are what's important, and the fundamentals are still strong. And you know, they may turn out to be right.
SHAPIRO: Thanks, Jim.
ZARROLI: You're welcome.
SHAPIRO: That's NPR's Jim Zarroli. Transcript provided by NPR, Copyright NPR.
