The Dow Jones Industrial Average fell almost 2% in early trading but recovered most of that ground by late afternoon, with the index closing down only 0.2% at 34,298.
Prior to Tuesday, the S&P 500 had already lost 8% of its value this year, placing it just shy of a correction.
Market volatility has flared this month as investors weigh how aggressively the Federal Reserve, which is holding a policy meeting this week, may raise interest rates to combat rising inflation.
Historically, stocks have tended to fall sharply when core inflation, which excludes volatile food and energy prices, hits 5.5%, according to UBS analysts.
The upshot is that the Fed “is likely to be looking at a hot inflation dashboard at its next few meetings,” the analysts said.
The Pentagon ordered 8,500 troops on higher alert to potentially deploy to Europe as part of a NATO “response force” to a military move on Ukraine.
Along with monetary policy and geopolitical risks, markets are focusing on corporate earnings as reporting season kicks off.