NEW YORK (Bloomberg) — The Standard & Poor’s 500 Index fell into a correction for the first time since 2011 in one of the most volatile trading days ever, as a rout in global equity markets deepened.

It was a day of wild swings as equities plunged at the open before staging a sharp rebound, with the Nasdaq 100 Index by midday nearly erasing a 9.8 per cent drop. The Dow Jones Industrial Average dropped 1,000 points in the opening minutes of trading yesterday, while the S&P 500 tumbled 5.3 per cent and then pared declines before an afternoon wave of renewed selling.

The S&P 500 dropped 3.9 per cent to 1,893.21 at 4pm in New York, and closed 11 per cent below its May record. The Dow lost 588.40 points, or 3.6 per cent, to 15,871.35, after sliding as much as 6.6 per cent. The Nasdaq Composite Index retreated 3.8 per cent to its lowest level since October 27, trimming an early 8.8 per cent skid.

“Investors in China have lost confidence in the central bank, and it’s a very alarming and difficult situation for the markets,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W Baird & Co, which oversees $110 billion. “It ultimately depends on whether the China situation results in a severe economic slowdown. It that happens, it’s going to ripple through the US.”

About 14 billion shares traded hands on US exchanges, the most in more than four years. It was the second-highest value traded ever, according to Ana Avramovic, a US strategist at Credit Suisse.

The Chicago Board Options Exchange Volatility Index rose 45 per cent to 40.74, after an early 90 per cent surge that temporarily sent the index to its loftiest level since January 2009. The gauge known as the VIX closed at a nearly four-year high after more than doubling last week.

The Dow’s 1,089.42-point swing from its session low to its high is the biggest one-day net point swing in the average’s history. The 7.1 per cent move between Monday’s high and low is the largest since the flash crash of May 6, 2010. Both the S&P 500 and the Dow posted their largest two-day declines since December 2008. The S&P 500’s rout sent valuations tumbling. The price-to- earnings ratio for the gauge sank to 16.76, the lowest level since the October pullback. Then, the measure bottomed just above 16.50, the cheapest since January 2014. The less-expensive shares enticed some buyers, as equities sharply trimmed their opening losses.

“As prices go lower, we see selective opportunities to buy as opposed to a provocation to become more bearish,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, the private-banking unit of KeyCorp that oversees more than $25 billion in assets. “We’re emphasising large-caps relative to smaller ones,” and within the US, companies that are less export-oriented.

Calm in the US market shattered last week, with volatility soaring by the most on record as the Dow entered a correction and investors dumped the biggest winners of 2015. Shares succumbed to a global sell-off that’s wiped more than $5 trillion off the value of equities around the world since China’s shock currency devaluation on August 11.

The S&P 500 is on track for its worst August decline in 17 years. It sank the most since 2011 on Friday amid signs China’s economy is weakening, capping its single 5 per cent decline of the year after spending the previous seven months locked in a trading range that had no precedent in a century of market history.

Moreover, speculation had been building all year for the Federal Reserve to raise interest rates in September for the first time since 2006, following the end of quantitative easing in 2014.

Traders are now pricing in a less than one-in-four chance the central bank will act next month, from about 48 per cent just before the yuan devaluation, as the rout in equity markets has shaken confidence that the global economy will be strong enough to withstand higher US rates.

“The chickens are coming home to roost,” said Thomas Thygesen, SEB’s head of cross-asset strategy in Copenhagen. “We’ve been too hopeful that Fed tapering didn’t matter, that they could hike interest rates and we’d still have a healthy economy. Since the Fed stopped bond purchases, they’ve been choking the life out of global manufacturing and that matters most for commodities and emerging markets.”

The retreat in global stock markets bears resemblances to losses that hit equities in 1998, when financial stress from Asia to Russia sent the S&P 500 down 19 per cent, only to recover in three months, said Laszlo Birinyi, the president of Birinyi Associates in Westport, Connecticut.

“I wouldn’t expect a mirror image but my point is that for all the negative things I’ve read this weekend, almost all of these have been comments by people who were bearish to begin with,” Birinyi said yesterday in an interview on Bloomberg Radio. “This is a short-term painful correction but when you have a situation where the market is well aware of the issues, the market has ability to correct.”

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