Stocks came off brutal session lows in the final hour of trading Wednesday, after being deeply in the red as a massive selloff in crude oil prices spooked traders.
The Dow Jones Industrial Average slid 1.6%, though recovered from a drop of around 500 points earlier in the day, the S&P 500 was down 1.1%, and the Nasdaq turned slightly higher. The Volatility Index, otherwise known as the "fear index," jumped 10% to 28.65.
Crude oil prices extended their decline on Wednesday to close at their lowest level since May 2003. Pressure remained after the International Energy Agency warned that the global oil market could "drown" in oversupply this year as Iranian oil floods demand. West Texas Intermediate was down 6.7% to $26.55 a barrel.
Some speculate that the worst for oil has yet to come, bad news for both commodities and equities investors. Morgan Stanley analysts predicted oil prices in their $20s earlier this year, a forecast which is now reality.
Global markets engaged in a steep selloff after a major rally on Tuesday. In Asia, the Hang Seng in Hong Kong fell to its lowest level since the financial crisis, while the Nikkei in Japan fell into a bear market, down more than 20% from its recent high. All European markets were lower.
"We're not yet three weeks into the new year, and already, warning bells are going off about the global economy," said Christopher Vecchio, currency analyst at DailyFX. "The global equity market rout has taken on a new identity with losses of -20% or more piling up over the past 52-weeks. The German DAX 30, the UK FTSE 100, and the Japanese Nikkei ... have all entered bear market territory."