Economists and investment strategists are debating whether yesterday’s stock slump was an odd jolt to an otherwise bullish equities market or a harbinger of long-term — and long overdue — doom for the world’s capital markets.

Yesterday’s bad news included a discouraging durable goods report, an assassination attempt on the vice president, and reports of remarks broadcast in Hong Kong on Monday by the former chairman of the Federal Reserve, Alan Greenspan, that posed the possibility of a recession later this year. The tumultuous day on Wall Street followed similar volatility in China after the government there announced plans to hunt down illegal share offerings. According to Bloomberg News, Chinese stocks slumped the most in a decade.

This combination of geopolitical scares and macroeconomic gloom sent jittery investors into a stock sell-off as the Dow Jones Industrial Average plummeted 3.3%, or 416.02 points — the largest point-drop since the first day of trading after the September 11, 2001, attacks and the seventh-largest point drop in the history of the index.

After the closing bell, investors were largely dumbfounded with the latest turn in their recent equity roller-coaster ride. Just last week the Dow closed at an all-time high at the same time the Nasdaq Composite and S&P 500 closed at six-year highs. And just yesterday, TXU Corp. announced its acquisition by private equity firms in what is being billed as the largest leveraged buyout in history.

Some investors view yesterday’s events as enough to cause a short-term slump in the stock market, but they remain bullish for the long term. “Stock prices are fundamentally driven by earnings and interest rates,” the managing partner and chief investment strategist of Strategas Research Partners LLC, Jason Trennert, said. “Earnings growth will slow this year, but that is well known. The level of earnings and the level of interest rates suggest that fair value for the market is about 15% higher.”

Bargain hunters on Wall Street swept in during a dramatic 20-minute period near the end of the trading day yesterday, boosting the Dow more than 220 points in intraday trading to its close at 12216.24. The Nasdaq Composite Index dropped 96.66 points, or 3.9%, to 2407.86, and the S&P 500 sank 50.33, or 3.5%, to 1399.04. The sudden drop in the price of gold was just as noteworthy. Gold futures for April delivery fell $20.90, or 3%, to $666.30 an ounce at 4:38 p.m. in New York in electronic trading on the Comex division of the New York Mercantile Exchange.

Yesterday’s market tremors didn’t seem to faze the confidence displayed at the monthly lunch meeting of the Real Estate Board of New York in Midtown. “The Dow doesn’t appear to correlate with residential housing prices here in New York,” the president and CEO of the real estate appraisal firm Miller Samuel Inc., Jonathan Miller, said. “What it does correlate with are employment levels and wages in the financial services sector. I don’t see how a one-day drop would impact either in the long run.”

The U.S. Department of Commerce said orders placed with American factories for durable goods slumped 7.8% following a 2.8% gain in December. Orders excluding transportation equipment slid 3.1%. Bloated stockpiles at auto dealers and construction-equipment makers may restrain production early this year, the Federal Reserve Chairman, Ben Bernanke, told Congress this month.

“I think that risk has been re-priced across the board,” the managing director of Eos Partners LP, Eli Combs, said shortly after the market’s close yesterday. “The effects of this will continue to be felt tomorrow and at various points in time in the near future as the markets continue to digest today’s move.”

Mr. Combs said he was closely tracking the Chicago Board Options Exchange Volatility Index (VIX) as it spiked above 19 late yesterday. “A rise in the VIX should affect almost any asset with optionality,” he said. Because the markets for derivatives are so large, Mr. Combs said he expects today’s price movements will force investors to adjust their exposures — a process that will take more than a day or two.
This is the first significant spike in some time for the VIX, which is derived by calculating the implied volatility of both puts and calls on S&P 500 Index options. Mr. Combs said that the fact that a lack of risk has been priced into both emerging markets and high-yield fixed income is a longstanding concern, however, and any sort of correction could take time. “Whether this is the beginning of a slide in that direction is anybody’s guess,” he said.

Indeed, emerging-market bonds and currencies fell as the tumble in Chinese stocks curbed investor demand for riskier assets. The average spread for emerging-market bonds over American Treasuries rose to the highest since December 7 after China’s main stock market index sank 9.2%, the biggest drop in a decade. Brazil’s real, Turkey’s lira, and the South African rand led a slump in developing-nation currencies.

Europe’s Dow Jones Stoxx 600 Index dropped 3% and emerging markets sank. Russian shares slid from an all-time high; Brazil’s Bovespa Index lost 6.6%.

American Treasuries rose on increased demand for debt securities amid signs of a slowing economy after durable-goods orders fell more than forecast in January. The plunge in China “exposed the fact that there are problems developing,” the co-founder of the Quantum hedge fund, Jim Rogers, told Bloomberg News yesterday. “When you have major stock declines, they always start in marginal countries, sectors, and companies.”

Mutual fund giant Vanguard noted in a statement yesterday that yesterday’s declines in percentage terms paled in comparison to the 22% one-day drops in the Dow Jones Industrials and S&P 500 Index on October 19, 1987. “We’ve had a very nice rebound in stocks since the long bear market that began in early 2000 and stretched into 2002,” Vanguard’s chief investment officer, George U. “Gus” Sauter said. “So it’s not surprising to see a pullback.”