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Small caps lead late-day bounce back

Russell 2000 indicating worst to come?

After a daylong pummeling, stocks shed much of their worst losses in the final hour, as small caps turned positive.

"They were the most oversold and that's why they're trying to come back," said Art Cashin, director of floor operations for UBS.

The was up 1 percent at the market close, while the Dow, off 173, had recovered about 300 points. Small caps, at stretched valuations earlier in the year, were the first group to fall into correction territory and were seen as a barometer warning of a broader market selloff.

Fears of everything from global growth to Ebola fanned selling in stocks and forced a dramatic capitulation trade in Treasurys.

"Greece is only in Greece. Ebola's not getting out of control and corporate profitability looks pretty good to me," said Steve Massocca of Wedbush Securities.

Europe soured the mood early, as traders focused on headlines about Greece considering abandoning its bailout.