What Free Fall? Dow Closes Up 423 Points Thursday
NEW YORK (CBSNewYork/AP) – It’s understandable if people are getting dizzy watching the Dow, considering Wednesday’s shocking 519 point plunge. That was just the latest go round on the Dow’s recent wild ride.
Wall Street’s wildest week since 2008 continued with another 300-plus point move for the Dow on Thursday. This time, stocks shot up after investors saw small signs that the economy might not be headed into another recession.
The Dow Jones industrial average held on to gains all day and rose 550 points at around 3: 45 p.m. The Dow ended the day on a high note up 423 points.
The S&P 500 index rose 51 points, or 4.6 percent, to 1,173. The Nasdaq composite index rose 111, or 4.69 percent, to 2,493.
“It’s a rollercoaster ride without the fun involved in it,” investor John Torturo told CBS 2’s Hazel Sanchez.
Fewer Americans joined the unemployment line last week, and a technology bellwether said revenue could grow faster this quarter than analysts expected. The number of people filing for unemployment dropped 7,000 to 395,000, that is the biggest drop in four months.
“We have to get Americans working. We have to get them spending. That’s the best confidence booster in the world,” trader Alan Valdes said.
Analysts said it may be a sign that the job market is slowly improving after its three-month slump. Job growth slowed to an average of 72,000 in May, June and July. In the previous three months, employers added 215,000 jobs per month, on average.
Thursday, President Barack Obama talked job creation and tried to rally public confidence at a car battery factory in Michigan. Obama said the downgrading of the U.S. credit rating could have been entirely avoided if politicians in Washington had been willing to compromise.
“We’re supposed to all be on the same team. Especially when we’re all going through tough times. We can’t afford to play games. Not right now, not when the stakes are so high for our economy,” Obama said.
The unemployment news pushed prices on long-term Treasurys down, and gold fell from its record high.
Gold rose above $1,801 per ounce for the first time on Wednesday as stock markets tumbled around the world. But it fell to $1,748.80 Thursday.
During a calm market, a 300 point move would rank as the Dow’s biggest in months. During this volatile week, it’s the smallest.
On Monday, The Dow plunged 634 points only to gain 429 points Tuesday and then sink 519 points Wednesday. It’s the first time that the Dow has moved by more than 400 points in three straight days since November 2008, when markets were tumbling during the financial crisis.
Carlton Neel, who manages about $2 billion as a senior portfolio manager at Virtus Investment Partners said investors are so scared of being the last one out of the market in a downturn or the last one in during a rally that they are stampeding in herds, creating more volatility.
“Fear tends to be a much more powerful emotion, and the sell-offs tend to be more violent than the rallies,” he said. “But people are worried about missing the bottom, so you will have a few melt-ups along the way.” That’s because memories of the last meltdown in 2008 are still fresh in the mind of many investors.
In the last few weeks, investors have grown more worried about the economy. The government said last month that it grew at its slowest pace in the first half of 2011 since the recession ended in 2009. Unemployment is still above 9 percent.
Investor concerns are piling up with worries not only about the U.S. economy, but also Europe’s growing debt problems.
The leaders of France and Germany, the region’s biggest economies, said they will meet next week to talk about how to solve Europe’s financial difficulties. Worries that Europe’s debt problems could hurt the banks that own European government bonds have weighed heavily on financial stocks and the broader market. Pain for European banks could lead to more trouble for the U.S. banking industry and economy because the global financial industry is so closely linked. That has been one reason stocks have declined in the last several weeks.
Reports also circulated that European markets were considering a ban on selling stocks short, which is a way that traders bet a stock will fall.
Rumors have been a big force in driving the market in the last week. On Friday, speculation that Standard & Poor’s may downgrade the U.S. from its top AAA credit rating helped knock down stocks. It turned out to be correct.
This week, speculation has centered on European banks, French ones in particular. The head of France’s central bank said Thursday that the country’s banks are solid and blamed “unfounded rumors” for big drops in their stocks.
What do you have to say about this week’s rollercoaster ride on Wall Street? Sound off in our comments section below…