Instability awaits after correction

NEW YORK – Wall Street might have picked up some impressive gains this past week, but that’s not enough for analysts to declare the stock market safe from a deeper correction.

Trading remains erratic following a global equity selloff that caused the biggest losses in four years. And analysts are still debating exactly what caused it.

In the meantime, the mood on the street is still uneasy even if there were signs of stability during the week – the evidence of that was clear in an uncertain session Friday, and that means more volatility can be expected.

“The strength we saw during the week does not indicate that the public and others feel they’ve seen the all-clear signal,” said Art Cashin, director of floor operations for UBS.

“This was like an earthquake, and in the ensuing days we had several aftershocks,” he said. “You’ll need several days of calm before the village can go back to its usual business. We’ve had a couple of them, but there’s still questions if we can make it through next week.”

He believes yen carry trades were to blame for the selloff. Carry trades refer to the practice of borrowing or selling low-yielding currencies, such as the yen, and reinvesting in higher-return assets.

It is too soon to tell how long it will take for Wall Street to complete its recovery. Stocks have recouped about one third of their losses since the drop.