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Wild ride on Wall Street after 565-point drop

Last Updated Jan 20, 2016 4:24 PM EST

Wall Street's worst-ever start to a year didn't get much better on Wednesday.

But it could have ended far worse than it did, with the Dow (DJIA) rallying back from a 565-point loss to finish at 15,767, down 249 points, or 1.6 percent. The S&P 500 (SPX) declined 22 points, or 1.2 percent, to 1,859. The Nasdaq Composite (COMP) lost five points, or 0.1 percent, to 4,472.

"Today was a combination of valuation reset, and I would say large institutions or high-profile investors were forced to liquate positions to meet margin loan requirements," Jack Ablin, chief investment officer at BMO Private Bank, said. "We reached a selling crescendo during the middle of the day, then slowly the market recovered from that."

On Wednesday, benchmark indexes plunged, echoing a global rout that came as oil continued to cave, dropping to a 12-year low.

"Negativity is driving the markets in 2016," said Nick Raich, CEO at the Earnings Scout. "Some of the selloff has been justified, stock prices are resetting to reflect lower growth expectations."

Energy weighed the most among the S&P 500's 10 major sectors, all but one of which were in the red.

"Data justify a correction, not necessarily a bear market," said Raich of economic reports, which on Wednesday had the cost of living in the U.S. falling in the final month of 2015.

A separate report illustrated an unexpected December decline in new-home construction.

IBM (IBM) shares lost ground, falling 5.6 percent to $121.00 a share, after the technology giant's 2016 earnings outlook came in below projections.

On the New York Mercantile Exchange, crude futures dropped 6.7 percent to $26.55 a barrel.

Investors fled to perceived safe-havens including gold and U.S. Treasury bonds, with gold futures up 1.3 percent at $1,103.50 an ounce and the 10-year Treasury yield sliding under 2 percent.

Capital Economics in a note called the selloff overdone, saying the outlook for the U.S. economy is "reasonably bright." The research firm expects global growth of 3 percent this year, up from 2.5 percent in 2015. "Employment growth is likely to remain strong, causing the unemployment rate to fall below 5 percent," Capital Economics predicted. "This in turn should support consumption growth and prompt wage inflation to pick up later this year."

The market volatility comes along with confusing news related to China's slowdown and its impact on the rest of the world, Jacob Frenkel, an economist and chairman of JPMorgan Chase International, told CBS News in Davos, Switzerland. "We're now in period of disconnect between the real economy and financial markets. In such periods if you really want to have an assessment about the real economy it will not be helpful to look at it through the prism of financial markets."