The US stock markets rose on Tuesday after days of steep declines, bringing some calm to global markets. Major indices such as the Nasdaq, Dow Jones, and S&P 500 surged in early trade, while Japan’s Nikkei 225 bounced back significantly. Investigations continue into why tech stocks might be severely overvalued, which had led to the high volatility along with other factors such as fears of a possible recession in the US.

For days, the global stock markets had been on a wild ride, keeping investors nailed to their seats. On Tuesday, however, US equity markets rebounded with hardly an echo of drama. The Nasdaq, the Dow Jones, and the S&P 500—three of the main indices tracking the stock market—all gained at the opening bell.

This came after a session of mixed trading in the UK and Europe. London’s FTSE 100 rose at the open but fell back. In Japan, the Nikkei 225 surged by 10.2 per cent or 3,217 points in its biggest one-day gain, following a sharp decline the previous day.

“The trouble on the stock markets began on Friday, when disappointing employment figures emerged from the US. The jobless rate had risen in July.” It brought a complete turn of events: Now, people were worried about recession, and at the same time, there were also fears that big tech companies were overvalued, especially those heavy investors in AI, and might face problems.

It spread to Europe and Asia on Monday, sending Japan’s Nikkei 225 down 12%. US tech giant stocks from Nvidia to Alphabet to Apple tumbled in afternoon trading. Rachel Winter, a partner at investment firm Killick & Co, said, “Markets were hit by a perfect storm over the weekend, with several factors combining to spook investors.” She went on to say that nerves over the forthcoming US presidential election contributed to the market’s volatility since “markets abhor uncertainty.”

There are mixed views among economists on the future of the economy in the US. Others say it is too early for the hand-clapping; a recession is coming. However, if it does come, it may be big globally. As the economist Mohamed El-Erian said, “What happens in the US economically and financially does not stay in the US.” He highlighted that the US has been leading the pulse of world growth, saying it was the US consumer who remained a huge driver of economic activity worldwide. A recession in the US, therefore, had to affect the world’s economy.

Some are asking for the US Federal Reserve to slash interest rates at its September meeting to head off recession. Interest rates were retained, from the recent decision, within the 5.25%-5.5% range—the highest in two decades—while other central banks had opted to cut their respective rates. Some experts believe keeping rates high was a mistake, and that the stock markets will likely remain unstable until the Fed makes its next decision. “Markets are very volatile at the moment and will likely stay volatile until the Fed decision in September, so we wouldn’t rule out rapid swings in both directions,” said Stefan Angrick, a senior economist with Moody’s Analytics.

Part of the problem in Japan on Monday was domestic in nature. The Japanese yen has been rising against the US dollar since the Bank of Japan raised interest rates last week, which is making it more expensive to buy stocks in Tokyo or Japanese goods. Also, consumer prices in Japan surged more than forecast in June and the economy contracted in the first quarter. Jesper Koll, executive director of Monex Group Japan, is sanguine despite this. He said, “Japan’s fundamentals are strong, recession risks are nil and corporate leaders are dead-set on raising capital returns.”

While the US stock markets have recovered, the general outlook of the economy remains unknown at the final analysis. Investor focus will remain on further actions by the Federal Reserve and on the global economic scenario.