We’ve seen this movie before.

The main indices fell today, amid yet another day of wild intraday swings. The Dow, S&P 500 and Nasdaq all closed in the red. Strong earnings were offset by rising bond yields.

General Motors (NYSE: GM) rose in the wake of earnings that beat expectations. Boeing (NYSE: BA) continued its ascent on the strength of a stellar outlook. GM and BA finished the day up 1.27% and 2.16%, respectively.

Tesla (NSDQ: TSLA) spiked ahead of earnings. Tesla reports after the close today. Expectations are upbeat. Tesla CEO Elon Musk is basking in the glow of Tuesday’s successful rocket launch by his private firm SpaceX. Tesla closed the day up 3.30%.

About 50% of S&P 500 firms have reported fourth-quarter results. So far, 75% of them have reported positive earnings surprises. The earnings growth rate is expected to come in at 13.4%. All 11 sectors are reporting earnings growth for the quarter.

Those are solid numbers. But rising interest rates are spoiling the party.

Are recent market declines mere speed bumps? Or does further carnage lie ahead? One thing is certain: volatility is back. The news drives volatility. Wall Street hates uncertainty, of which there is plenty.

On Friday, the Dow fell 665.75 points, the sixth-worst drop in its history. The following Monday, the Dow fell 1,175.21 points, its largest intraday drop ever.

On Tuesday, investors rode a roller-coaster. The Dow closed 567 points higher, but it was a manic day of trading. In the span of 20 minutes, the Dow moved 900 points in both directions.

Wednesday was another nail-biter, as stocks bounced from big losses to big gains. In the final minutes of trading today, stocks coughed up their gains.

The most watched gauge of volatility is the CBOE Volatility Index (VIX). It uses the price of options to estimate implied volatility. The VIX pulled back nearly 19% on Wednesday, after soaring all week.

Vexed by the VIX…

Volatility scares investors. Fear can trigger contagion. Investors remember the pain of losses more than the joy of gains. They associate volatility with risk, and risk with loss.

But volatility really isn’t risk; it’s the relative movement of stock prices up and down over time.

Remember this: market volatility provides more money-making opportunities.

Investing involves chance. Each trade carries the chance of success and failure. Without volatility, there’s a lower chance of success.

Volatility is back. Volatility is the norm. And it can be your friend. Volatility is a positive sign that equities will generate higher returns over the long haul. 

A long period of unnatural calm is coming to an end. The market in a typical year undergoes a correction of about 10%. Before the recent market rout, the S&P 500 had gone for two years without a 5% pullback.

Corrections present buying opportunities. Therein lies the rub: will the market keep falling? Only fools try to time the market. But we still haven’t had a correction. Each of the bull markets in the last 40 years has experienced one.

Low interest rates kept the rally going. But the Fed has removed the punch bowl. Say goodbye to easy money.

Should you buy on dips? There’s a Wall Street saying: never try to catch a falling knife. A falling investment could rebound. Or it could lose more value. Trying to predict the bottom is like grabbing a knife on its way down. Pain usually ensues.

Tread carefully. Stay diversified. Raise cash levels. The bull is staggering on very wobbly legs.

Wednesday Market Wrap

• DJIA: -0.08% or -19.70 points to close at 24,893.07
  
• S&P 500: -0.50% or -13.52 points to close at 2,681.62
  
• Nasdaq: -0.89% or -63.23 points to close at 7,052.65
  

Wednesday’s Big Gainers

• Snap (NYSE: SNAP) +47.01%

Social media firm beats on earnings.

• Model N (NYSE: MODN) +26.36%

Software firm reports strong earnings.

• Genworth Financial (NYSE: GNW) +7.45%

Life insurer seeks merger with peer.

Wednesday’s Big Decliners

• MagnaChip Semiconductor (NYSE: MX) -11.83%

Chipmaker’s earnings disappoint.

• JinkoSolar Holding (NYSE: JKS) -10.81%

Solar tariffs weigh on photovoltaic maker.

• Chipotle Mexican Grill (NYSE: CMG) -10.56%

Restaurant chain plans costly upgrades.

Letters to the Editor

“Are emerging markets a good bet?” — Jerry M.

Emerging markets are bouncing back. They’ve spent years in the doldrums. Global growth is “synchronized.” That means most regions are thriving.

Emerging market stocks present good values. They’re a bargain versus those in the developed world. In the developing world, disposable incomes are rising in tandem with consumer savvy. Tech gadgets are in demand. E-commerce is booming.

Emerging market populations are younger, and hence freer spending, than those in developed countries. Export-driven nations get a lift from rising commodity prices.

Questions about overseas stocks? Shoot me an email: mailbag@investingdaily.com

John Persinos is managing editor of Personal Finance and chief investment strategist of Breakthrough Tech Profits.