Market Volatility Increases As Dow Tumbles Over 400 Points

U.S. stocks settled lower after a volatile session on Tuesday amid increasing tensions between the US and China following House speaker Nancy Pelosi's visit to Taiwan.

All the three major indices settled in the red zone, with the blue-chip Dow Jones recording the worst performance.

The safe-haven US dollar, however, reversed recent losses, rising 0.8% versus a basket of major currencies on Tuesday.

Weak economic reports along with escalating US-China concerns also sent European stocks lower on Tuesday.

Shares of Caterpillar CAT dropped 5.8% on Tuesday after the company reported worse-than-expected Q2 sales results. BP p.l.c. BP shares, however, added over 1% after reporting a sharp rise in quarterly profits.

The Dow Jones fell around 1.23% to close at 32,396.17 on Tuesday, while the S&P 500 and Nasdaq Composite dropped approximately 0.67% and 0.16%, respectively in the previous session.

All the major sectors on the S&P 500 settled lower, with real estate and financial stocks recording the biggest drop on Tuesday.

The Chicago Board Options Exchange's CBOE Volatility Index (VIX) climbed 4.8% to 23.93 points.

U.S. stock futures, meanwhile, traded higher this morning on Wednesday, with investors now awaiting the release of economic data on ISM services index and factory orders today.

What is CBOE Volatility Index?

The CBOE Volatility Index, popularly known as VIX, is a measure of the equity market's expectation of volatility based on S&P 500 index call and put options.