Dow up 423 as Wall Street whipsaws again

STAN CHOE

AP Busi­ness Writer

NEW YORK — Lurch­ing higher in its week of whiplash, Wall Street recorded one of its biggest gains of all time Thurs­day after investors seized on a few signs that the econ­omy might just be able to avoid a new recession.

The Dow Jones indus­trial aver­age soared 423 points. It had already fallen 634 points Mon­day, risen 429 Tues­day and fallen 519 Wednes­day. Never before has the Dow had four 400-point swings in a row.

The pieces of news that sent Wall Street rock­et­ing higher were not exactly block­busters: Cisco Sys­tems said its profit was bet­ter than expected, the job mar­ket got a lit­tle bet­ter, and France tried to raise con­fi­dence in its shaken bank­ing system.

But this is a week in which any move by the mar­ket — higher or lower — seems to touch off an investor stam­pede. So it was on Thurs­day, when stocks shot higher at the open­ing bell and never turned around.

Carl­ton Neel, who man­ages about $2 bil­lion as a senior port­fo­lio man­ager at Vir­tus Invest­ment Part­ners, said investors are so scared of being late to a rally or a sell-off that they are trad­ing in herds.

“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.”

The four days of trad­ing this week have been the wildest for the mar­ket since the finan­cial cri­sis dur­ing the fall of 2008. Each day has instantly taken a place in Wall Street his­tory. The Dow’s losses on Mon­day and Wednes­day were its sixth– and ninth-largest by points, and its gains on Tues­day and Thurs­day were the 10th– and 11th-largest.

The Stan­dard & Poor’s 500 index has risen or fallen at least 4 per­cent each day. That has not hap­pened on four con­sec­u­tive days since Novem­ber 2008, the depths of the crisis.

It’s only the third time since 1934, said Kevin Pleines, an ana­lyst at Birinyi Asso­ciates. The first was Octo­ber 1987 — includ­ing the day known as Black Mon­day, when the S&P plunged more than 20 percent.

On Thurs­day, Amer­i­can investors got an encour­ag­ing report before the mar­ket opened when Euro­pean stock mar­kets turned around their losses and had one of their best days in recent weeks.

The lead­ers of Ger­many and France, the biggest economies of the nations that use the euro cur­rency, announced they will meet Tues­day to dis­cuss the finan­cial cri­sis on the continent.

The stocks of French banks have been ham­mered because of con­cerns they will be hit with mas­sive losses from Euro­pean sov­er­eign debt they hold. One Euro­pean nation after another has strug­gled with debt, with Spain and Italy the latest.

France is try­ing to assure finan­cial mar­kets that it will not be down­graded from AAA, as the United States was. All three lead­ing credit rat­ing agen­cies reaf­firmed the top rat­ing for France. Amer­i­can investors have wor­ried about a chain reac­tion that hurts the United States because large U.S. banks have loans to Euro­pean banks.

An hour before the U.S. mar­kets opened, the gov­ern­ment reported that the num­ber of peo­ple fil­ing for unem­ploy­ment ben­e­fits fell below 400,000 for the first time since April.

When the open­ing bell rang, tech­nol­ogy stocks led the mar­ket higher. Cisco Sys­tems, the world’s largest maker of com­puter equip­ment and a tech bell­wether, rose more than 15 per­cent after it reported profit that was bet­ter than Wall Street expected. It also said its rev­enue this quar­ter would be bet­ter than expected.

The Dow fin­ished at 11,143.31, up 423.37 points, or about 4 per­cent. The S&P 500 fin­ished up 4.6 per­cent and the Nas­daq com­pos­ite index 4.7 percent.

It was three weeks ago, on July 22, when the stock mar­ket began a long los­ing streak. Investors were wor­ried mostly about the show­down in Wash­ing­ton over whether to raise the nation’s bor­row­ing limit.

Then came one sign after another that eco­nomic growth was much slower than ana­lysts had thought, in addi­tion to grow­ing wor­ries about the debt cri­sis in Europe and the sta­bil­ity of Euro­pean banks.

Dur­ing those three weeks, the Dow is down almost 1,600 points, or about 12 per­cent. It is still up 70 per­cent since March 9, 2009, its low­est point after the 2008 finan­cial crisis.

Pres­i­dent Barack Obama acknowl­edged this week’s wild mar­ket swings and made another attempt to calm Amer­i­cans who have watched their retire­ment accounts and other invest­ments shrivel since mid-July.

The pres­i­dent toured a plant in Hol­land, Mich., that makes bat­ter­ies for hybrid cars and trucks and said he under­stands that the volatil­ity “makes folks ner­vous” and has ham­mered sav­ings accounts.

He reeled off a list of chal­lenges for the econ­omy — unrest in the Mid­dle East, an earth­quake in Japan that dis­rupted Amer­i­can man­u­fac­tur­ing, the Euro­pean finan­cial cri­sis and lin­ger­ing dam­age from the Great Recession.

But he declared: “There is noth­ing wrong with our coun­try. There is some­thing wrong with our politics.”

Stan­dard & Poor’s cited dys­func­tion in the Amer­i­can polit­i­cal sys­tem, not just the nation’s long-term debt, when it stripped the United States of its top-flight AAA credit rat­ing last Friday.

Even after the down­grade, investors have found U.S. Trea­sury bonds and bills irre­sistible, see­ing them as a haven of safety dur­ing an uncer­tain time. The demand has pushed up the price of U.S. debt, which has low­ered yields.

On Thurs­day, the Trea­sury sold $16 bil­lion worth of 30-year bonds at a 3.75 per­cent yield, the low­est bor­row­ing rate for the gov­ern­ment on that secu­rity since March 2009.

Yields for shorter-term Amer­i­can debt rose, but that appeared to be a response to the huge rally in stocks. Yields usu­ally rise when the stock mar­ket has a big day.

Gold fell $32.80 per ounce to $1,751.50 Thurs­day. It had rock­eted above $1,800 per ounce for the first time on Wednes­day as stock mar­kets tum­bled around the world.

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