By Matt Egan, CNN Business

The evolving US-China trade war has launched the stock market on a wild roller coaster ride.

News of the arrest of Huawei CFO Meng Wanzhou in Canada sent the Dow plummeting as much as 785 points on Thursday before the index staged a huge comeback. The Dow closed the day down just 79 points.

The Nasdaq eked out a small gain, recovering from trade war fears that had knocked the index down as much as 2.4%. The S&P 500 similarly rebounded, ending the day down just 0.2%.

The back-and-forth action shows how uncertain investors have become about the status of the US-China trade war. The market was also boosted by a report in The Wall Street Journal indicating the Federal Reserve is considering slowing down the pace of rate hikes next year.

"It's an encouraging sign that we closed significantly off the lows on a day that could have been in the record books for downdrafts," said Art Hogan, chief market strategist at B. Riley FBR.

While investors may be relieved at hints of a more cautious Fed, Hogan said that trade fears remain a major obstacle for the market.

"I don't think we fixed any of the things we were worried about," he said.

Huawei arrest sparks selling

The arrest of Meng sent shudders through global markets early in the day. Hong Kong's Hang Seng plunged 2.5% overnight, while European stock markets declined sharply as well. Germany's DAX nearly closed in a bear market, down nearly 20% from its January closing high.

Companies like Apple (AAPL) and Boeing (BA) that have significant exposure to China fell sharply before rebounding. Other trade-related stocks like Broadcom (AVGO) and Harley-Davidson (HOG) were also under pressure.

The arrest of Meng -- the daughter of the founder of one of China's most important companies -- serves as a fresh reminder that the United States and China remain in a trade war, despite the ceasefire reached last weekend in Argentina. Tariffs already imposed remain in place and new ones loom if talks fail to result in a breakthrough or at least an extension within 90 days.

Trade war fears

Renewed trade jitters, along with worries about an economic slowdown, sent the Dow plummeting 799 points on Tuesday. That selloff wiped out a chunk of last week's rally, which was the S&P 500's biggest weekly gain in seven years. US markets were closed on Wednesday in honor of President George H.W. Bush.

"The Huawei arrest just adds to concerns that this trade situation could deteriorate further," said Kristina Hooper, global market strategist at Invesco.

Hooper said investors have become more concerned about the US-China trade standoff because the negative impacts have become more apparent. Supply chains have been disrupted, raw material costs are on the rise and businesses may be delaying investment decisions.

"Almost none of us lived through the full-blown trade wars that erupted in the 1930s," Hooper said.

President Donald Trump spooked investors on Tuesday when he called himself a "Tariff Man" in a tweet. Trump also suggested tariffs will "MAKE AMERICA RICH AGAIN" -- even though these levies are paid by American companies and consumers.

Oil plunges again

Energy stocks retreated in tandem with plunging oil prices. Pioneer Natural Resources (PXD) and Baker Hughes (BHGE) slumped more than 3%. US oil prices tumbled 2.7% after OPEC and its allies concluded Thursday's meeting in Vienna without holding a press conference. Analysts had been anticipating a significant supply cut that would balance the market.

Saudi Arabia, the leader of OPEC, hinted that the reduction could be less than what analysts anticipated. Khalid Al Falih, the kingdom's energy minister, told reporters that a cut of 1.3 million barrels per day is "excessive."

Investors are also nervously watching a recession indicator in the bond market: the slope of the yield curve. The gap between the two-year and 10-year Treasury yield shrank this week to levels unseen since just before the Great Recession. An inversion -- where short-term rates are higher than long-term ones -- has been a reliable prognosticator of recessions in the past.

Concerns about the flattening yield curve weighed heavily on bank stocks. Bank of America (BAC), Citigroup (C) and Morgan Stanley (MS) all closed down on the day.