The S&P 500 index fell 69 points, or 2.8 percent, to 2,398 as of 2:15 p.m.
The Dow Jones Industrial Average rose 5%, or more than 1,000 points, and recorded the largest daily point gain in its history.
The tech-heavy Nasdaq lost 141 points, or 2.2 percent, to 6,411. A five-year-old exchange-traded fund tracking momentum shares rose 5.6 percent, its best day ever. "But with low liquidity and trading models responsible for the majority of trades in recent days, it might not be until the new year till you see greater stability", said Reilly.
The market apparently got a lift Wednesday when Kevin Hassett, chairman of the White House Council of Economic Advisers, said in an interview with The Wall Street Journal that the Fed chairman is in no danger of being fired. The S&P 500 also lost 7 percent for the week. That triggered further panic on Monday, with the global benchmark S&P 500 index of USA stocks slumping 2.7 per cent in what has been dubbed the "Mnuchin massacre".
However Chinese stocks were lower while there was also a mixed response in Europe with France's Cac 40 opening more than 1% higher but Germany's Dax slipping back.
A nerve-racking 5 per cent slump on Christmas Day was followed yesterday by another rollercoaster session on Japan's Nikkei, with a 1.8 per cent opening bounce reversing to a one per cent loss as investors ignored comments by Bank of Japan Governor Haruhiko Kuroda that the global economy was "robust enough to withstand a shock".
Woodside Petroleum (+3.4pc), Santos (+3.3pc) and Origin Energy (+3.1pc) were among the best performers.
Even so, traders have been jittery this autumn over signs that the global economy is slowing, the escalating USA trade dispute with China and another interest rate increase by the Fed.
The S&P 500 is careening toward its worst month of the record bull run and is down almost 17 per cent in the quarter as everything from higher interest rates to political turmoil in Washington to concern about global growth hammer at investor sentiment. The overall US economy is still strong, despite an ongoing trade war President Trump is waging with China and worries about a government shutdown. And a report late in the session that a US delegation will visit Beijing in early January for trade talks gave stocks a final push. "Oil prices have just moved quite markedly".
The president on Christmas Day cast fresh doubt on the record of Powell, whom he has increasingly blamed for the market weakness. Brent crude, used to price global oils, was down 2.6 percent to $53.34 a barrel in London.
Benchmark U.S. crude dropped 3.5 percent to settle at $44.61 a barrel in NY.
CURRENCIES: The dollar strengthened to 110.57 yen from 110.41 yen on Monday. Marathon Petroleum rose 1.9 percent to $55.36. South Korean shares tumbled after a holiday, and Shanghai stocks fell for a second day.