Dow Jones Industrial Average up 65 points at 10,130 so far this morning.
NEW YORK (AP) — Stocks turned higher a day after posting their
biggest drops in more than a year.
Trading has been volatile Friday and there are still worries about
Europe is handling its debt crisis. Analysts said a bounce back
after the slide Thursday wasn’t surprising.
The Dow Jones industrial average rose about 115 points in midday
trading after falling below 10,000 in morning trading.
The volatility comes after major indexes entered “correction” mode,
having dropped more than 10 percent from their 2010 highs set last
month.
Investors again looked to Europe for direction. The German
parliament approved the country’s share of a $1 trillion plan to
help contain debt problems in the European Union. Major stock
indexes in Europe were mixed but pulled well off their lows.
Traders have been worried that stronger countries like Germany and
France will be saddled with heavy debts to help weaker EU
countries.
The euro rose to $1.2543 from $1.2464. The 16-nation currency has
been a big driver of trading for weeks but many traders have been
skeptical that any advances will be short-lived.
World markets have been falling on concerns that European debt
problems will slow or maybe even stop a global rebound. The fear is
that huge deficits in countries including Greece and Portugal will
cause a wave of bad debt to race through the world’s financial
system. Even if that is prevented, the prospect of heavier
borrowing and sluggish growth has traders concerned.
It’s impossible to know whether the market is in for more than a
correction but analysts say that the fear hasn’t turned to panic
like it did during the market’s slide in late 2008 and early
2009.
“The likelihood of a double dip here is, I think, being really
exaggerated,” said Stu Schweitzer, global markets strategist at
J.P. Morgan’s Private Bank in New York, referring to the prospect
of another recession.
Schweitzer also expects the market will stabilize.
“It’s a very tough call to make, but I come down on the side that
it’s more likely to be a correction,” he said.
In midday trading, the Dow rose 105.95, or 1.1 percent, to
10,174.42. The broader Standard & Poor’s 500 index rose 15.61, or
1.5 percent, to 1,087.20. The Nasdaq composite index rose 33.55, or
1.5 percent, to 2,237.56.
The Dow had last fallen below 10,000 on May 6 when it lost nearly
1,000 points in an afternoon rout that was the biggest ever
intraday slide. Regulators have said they are still unclear on what
caused the brief drop.
The Dow tumbled 376 points Thursday. The Dow and the S&P 500
index fell more than 3 percent, while the Nasdaq lost 4.1 percent.
The drop has erased the gains major indexes had made in 2010.
Bond prices slipped after surging Thursday when investors dumped
anything seen as risky, including stocks and commodities. The yield
on the benchmark 10-year Treasury note, which moves opposite its
price, rose to 3.23 percent from 3.22 percent late Thursday.
Crude oil dropped 96 cents to $69.84 per barrel on the New York
Mercantile Exchange.
The Chicago Board Options Exchange’s Volatility Index fell 14.5
percent. The VIX, which is known as the market’s fear gauge, closed
Thursday at its highest level since March 2009. The jump signaled
that traders were bracing for more drops in the market.
Even with the drop of 12 percent from its 2010 high, the S&P
500 index is still up 58 percent from the March 2009 bottom and is
down 31.5 percent from its record close of 1,565 in October
2007.
Corrections can be scary but they can be good for markets. Analysts
say major stock indexes had become overheated in their climb from a
12-year low in March 2009. Corrections also aren’t unusual. Drops
of 10 percent occur in most years and don’t necessarily that stocks
will keep sliding.
“We don’t think there is any predictability that just because we’ve
had a 10 percent correction now that suddenly we’re in for another
10 percent drop,” said Bill Urban, principal with Bingham, Osborn &
Scarborough, based in San Francisco.
Financial stocks also drew attention. The Senate late Thursday
approved its version of a financial overhaul bill that contains the
biggest regulatory changes for banks since the 1930s. The bill will
now be reconciled with a version that passed the House.
Goldman Sachs Group Inc. rose $6.65, or 4.9 percent, to $142.75,
while Wells Fargo & Co. rose $1.31, or 4.6 percent, to $30.
The Treasury Department said after the slide in world markets
Thursday that Treasury Secretary Timothy Geithner would head to
Europe next week to meet with finance officials in Britain and
Germany on how to boost confidence in the financial system.
Britain’s FTSE 100 fell 0.9 percent and briefly dropped below the
psychological threshold of 5,000. Germany’s DAX index slid 1.6
percent, and France’s CAC-40 fell 0.7 percent. Earlier, Japan’s
Nikkei stock average fell 2.5 percent.
In corporate news, Dell Inc. reported after the closing bell
Thursday that its first-quarter net income increased but the
company’s gross profit margin fell from a year earlier. The stock
fell 81 cents, or 5.7 percent, to $13.51.
Gap Inc. reported a 40 percent increase in first-quarter net
income. The company boosted its profit forecast for the year but
the outlook fell short of analysts’ forecasts. Gap rose 61 cents,
or 2.8 percent, to $21.76.
