Volatility has roared back into global stock markets.
After relative quiet as US markets rose on strong earnings and signs of an improving economy, the past week and fears over the Greek debt crisis spreading to other countries has brought chaos not seen since the crisis burst into the open in three months ago.
On Tuesday, stock markets plunged 2 percent or more in several financial centers, including Frankfurt, Paris, London, and New York, where the Dow Jones Industrial Average lost 225 points. That was the Dow's biggest decline since Feb. 4 and its fifth day of double-digit moves in the last six trading days.
For nations at or near the epicenter of the crisis, the plunge was worse: Athens fell 6.7 percent; Lisbon was down 4.2 percent; and Spain (based on unfounded rumors of an impending rescue) declined 5.4 percent to a nine-month low. The euro fell to a 13-month low against the dollar.
These declines were based on fears that the Greek bailout plan, announced over the weekend by the European Union and the International Monetary Fund, wouldn't be enough to stop the crisis from spreading to other countries. Another fear: the bailout's terms may be too harsh to keep Greece from defaulting in the medium term.
"The economic pain that such belt tightening will bring suggests that it would be unwise to rule out a default further down the line," writes Ben May of Capital Economics.
The impact of the crisis on bonds has been more muted over the past week, notes Michael Darda, chief economist at MKM Partners. So it's not at all clear that the crisis will spread to the US, at least in the short term.
"LIBOR and interest rate swap spreads remain well within normal levels and thus do not suggest to us an imminent problem in the corporate bond market," he writes in an analysis. "However, the recent rise should not be ignored either, so we will continue to watch these indicators carefully."