Dow rebounds more than 500 points, recovering most of Monday's loss

U.S. stocks built on early gains Tuesday, attempting to regain a chunk of the ground lost in the previous session after rising worries over the spread of the delta variant of the coronavirus that causes COVID-19 triggered a selloff that left major benchmarks at nearly one-month lows.

On Monday, the Dow tumbled 725.81 points, or 2.1%, to end at 33,962.04, suffering its biggest one-day loss since October. The S&P 500 dropped 1.6% and the Nasdaq Composite shed 1.1%, for their biggest declines since May.

On Tuesday, stocks rebounded sharply from Monday's sell-off triggered by a Covid-inspired global growth scare.

Bond yields also rebounded with the U.S. 10-year stabilizing around 1.2%, after falling it its lowest level in 5 months on Monday.

“Until the 10-year yield rises back above 1.3% and stays above that level for a few days, today's stock market rally is likely tentative,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

Some strategists see the market heading into a volatile period, in which there could be a deeper pullback. Investors are juggling inflation concerns as well as new Covid cases are rebounding in the U.S. as the delta variant spreads.

Worries about the economic growth outlook could limit potential for equities to bounce in the near term, while making life more difficult for economic policy makers with inflation rising in the U.S, analysts said. The Federal Reserve has signaled it's prepared to begin discussing when it would be appropriate to begin tapering its monthly bond purchases, which would eventually be followed by interest rate increases.