The stock market freakout of early 2018 isn't over yet.
Stock futures swung wildly ahead of the U.S. open on Tuesday, highlighting the return of volatility to markets that had boomed over the previous year.
Monday was a brutal day for stocks: the Dow tumbled a record 1,175 points. The 4.6% plunge was the index's worst day since August 2011 and knocked it into the red for the year.
There was no respite after the close: Dow futures plunged more than 800 points late in the day. They then made a full recovery before volatile trading pushed them 75 points -- 0.3% -- lower by 5:45 a.m. ET.
The tremors on Wall Street spread around the globe, with stocks in Europe and Asia posting heavy losses.
Major markets in Europe shed roughly 2% in early trading. Japan's Nikkei nosedived 4.7%, while Hong Kong's Hang Seng suffered a loss of 5.1%.
After months of unusual calm, fear has raced back onto Wall Street in dramatic fashion.
The VIX index of market volatility spiked by a record 116% to the highest level in more than two years on Monday. CNNMoney's Fear & Greed gauge of market sentiment has gone from "extreme greed" a week ago to "extreme fear."
The sudden mood shift in the once-euphoric market is all about the threat of inflation. Worries about inflation first emerged in the bond market. Heavy selling sent the 10-year Treasury yield spiking to a four-year high.
Investors have become concerned that the era of extremely low interest rates that propped up stock prices for years may soon be over. The fear is that the U.S. economy could overheat, forcing the Federal Reserve to aggressively raise interest rates. That could take a lot of air out of the stock market.
The selling on Wall Street has left the stock market on the verge of a "correction," which signifies a 10% retreat from a previous high. The Dow is down 8.5% from its previous closing high, while the S&P 500 is off by 7.8%. The Nasdaq has tumbled 7.2% from its all-time high.
Despite the heavy selling, the Dow is still up around 6,000 points since President Trump's election. But that's down significantly from the 8,000-point gain it was showing a few weeks ago.
It's becoming clear stocks ran up too far, too fast in the euphoria over Trump's tax cuts and the improving economy. The U.S. unemployment rate is sitting at 17-year lows and global growth has gained momentum.
"The tax cut euphoria drove stocks up at an unsustainable pace," Scott Minerd, global chief investment officer at Guggenheim Partners, wrote in a research note. But concerns about oversupply in the bond market and higher interest rates have been growing, he added.
"This correction is a healthy development for the markets in the long run, and the equity bull market, while bloodied, is not broken," Minerd said.