August 11, 2011 in Business, Nation/World

Stocks soar on small positive economic signs

By Stan Choe Associated Press

Richard Drew photo

Trader Edward Curran smiles as he works on the floor of the New York Stock Exchange Thursday, Aug. 11, 2011.
(Full-size photo)

NEW YORK — Wall Street’s wildest week since 2008 continued with another 400-plus point move for the Dow today. This time, stocks shot up after investors saw small signs that the economy might not be headed into another recession.

Fewer Americans joined the unemployment line last week, and a technology bellwether said revenue could grow faster this quarter than analysts expected. The news pushed prices on long-term Treasurys down, and gold fell from its record high.

The Dow Jones industrial average rose about 420 points, or nearly 4 percent, to 11,142.

During a calm market, a 400 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. This is the first time ever that the Dow had four-straight 400-point days.

Such big up-and-down swings are reminiscent of 2008, when the financial crisis battered stocks. The last time the Standard & Poor’s 500 index rose or fell by 4 percent in four straight trading days, as it has just done, was Nov. 19, 2008 through Nov. 24, 2008. Over that span, the index went from down 6.1 percent to down 6.7 percent to up 6.3 percent to up 6.5 percent.

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 October 2008, the Dow rose and fell by more than 400 points four times each. That includes a 936 point surge on Oct. 13 after European central banks pledged more aid to banks and the U.S. Treasury offered more details about how it would help U.S. banks. Two days later, when a report showed retail sales had fallen more than anticipated, the Dow dropped 733 points.

On Friday, the government will say how much people spent at retailers during July. Economists expect a 0.4 percent rise, according to FactSet.

The S&P 500 today rose 52 , or 4.6 percent. It was the fourth straight day the index rose or fell by 4 percent. That hasn’t happened since Nov. 19-24, 2008 when it rose by at least 6.1 percent for two straight days and then fell by at least 6.3 percent for two more days.

Today’s gain came after the government said the number of people filing for unemployment benefits for the first time fell to 395,000 last week, down 7,000 from a week earlier. It’s the first time the number has dropped below 400,000 in four months.

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.

“It’s the first scrap of economic data we’ve had recently that says the idea that we’re going into another recession may be overdone,” Neel said.

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.

The Nasdaq composite index today rose 111, or 4.7 percent.

Technology stocks helped lead stocks higher. Cisco Systems Inc. profit for the latest quarter topped analysts’ expectations. Cisco is considered a bellwether for the tech industry because it is the world’s largest maker of computer networking equipment. The company also said revenue may grow more quickly in the current quarter than analysts were anticipating. Cisco rose 15.9 percent. As a group, tech stocks in the S&P 500 rose 3.6 percent.

Financial stocks also rebounded from their steep drop Wednesday, up 4.3 percent after a 7.1 percent drop a day earlier.

Media conglomerate News Corp., which owns Fox News and The Wall Street Journal, rose 18.9 percent. Its earnings, reported late Wednesday, were stronger than analysts expected.

Department store chain Kohl’s Corp. rose 7.9 percent after it said profit rose 17 percent last quarter on stronger sales of store-label brands.

Investors had been largely ignoring the strong profits that companies have reported since July. For the 452 companies in the S&P 500 that have reported second-quarter results so far, overall earnings are up 12 percent. Instead, investors have focused on worries about the weak U.S. economy and Europe’s debt problems.

The leaders of France and Germany, the biggest Eurozone economies, said they will meet next week to talk about how to solve the region’s financial difficulties. Worries that the continent’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 the economy because global financial firms are so closely linked.

Reports also circulated that European officials were considering a temporary ban on selling stocks short, which is a way that traders bet a stock will fall.

Rumors have been a force 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 he blamed “unfounded rumors” for big drops in their stocks.

Prices for longer-term Treasurys fell, as investors felt less need to put their money in investments considered safe. The yield on the 10-year Treasury note rose to 2.27 percent from 2.11 percent late Wednesday. A bond’s yield rises when its price falls.

Investors had been pouring into Treasurys earlier in the week, and they briefly knocked the 10-year yield to a record low of 2.03 percent Tuesday afternoon. Treasurys have held onto their reputation as a safe place to put money even after S&P cut the U.S. credit rating to AA+.

Gold also benefited early this week from buyers looking for something safe. It rose above $1,801 per ounce for the first time on Wednesday as stock markets tumbled around the world. But it fell to settle at $1,752 today.

CME Group raised the amount of money that investors must put up to buy a gold contract on its COMEX exchange by 22 percent late Wednesday.

The Vix index, a measure of investors’ fear, fell 11.8 percent to below 40. The index shows how worried investors are that the S&P 500 will drop over the next 30 days. It does that by measuring prices for stock options that investors buy to help protect their portfolios.

The Vix, though, is still nearly 30 percent above where it was in early July and remains up for the week.

The Dow’s climb today pulls the average further away from bear market territory: The Dow ended Wednesday 16.3 percent below its high for the year, reached on April 29. A drop of 20 percent would mean the bull market that began in March 2009 has turned into a bear, a long period of stock declines.

27 comments on this story so far. Add yours!

The_Seer on August 11 at 8:35 a.m.
It’s Obama’s fault.
Wow, that really does make one feel better. I don’t have to think anymore, I can just bleat a simple, three word mantra over and over until it actually becomes true in my mind.
Dang, being a conservative is so much easier. Now I just have to liquidate all of my assets so I can purchase a shiny rock!
hawken on August 11 at 9:33 a.m.
The markets are a “dying fish” flopping around on the deck, up and down, flopping around, gasping for the least, little bit of air.
tobiasg on August 11 at 9:45 a.m.
So right hawken, that fish flopping Obama has me scared, his kenyinsism economics and his anti-American communist behavior has me worried, we’re keeping our cash and gold buried in mason jars in the backyard until President Bachmann is sworn in.
Bruce (aka thatoneguy) on August 11 at 9:51 a.m.
The stock market is like a heart monitor. Something happens – say the phone rings when you’re just falling asleep –you jump up and say “wha?!”, your heart rate jumps, and the stock market takes a dive. Then you say “oh, OK, it’s just the phone,” and the market rallies. Then you realize it’s your mother-in-law calling and the heart rate / market goes haywire; then you find out she’s just calling to say thanks for remembering her birthday and the flowers are lovely, and everything is good in heart rate / stock market land.
Oy vey.
Bruce (aka thatoneguy) on August 11 at 9:54 a.m.
^ I forgot to say that people (if you can call them that) make billions of dollars off of scaring the hell out of the public and profiting from the resultant heart rate fluctuations, and others look wise or foolish trying to predict what’s going to happen in the next few days/hours/weeks/etc. It’s insane.
norpass on August 11 at 9:54 a.m.
“Fewer Americans joined the unemployment line last week …”
That’s good news? That only proves that the “markets” are completely bats*@t crazy.
Less Americans hit the breadlines and WE’RE SAVED!
Oh mommy, we are in so much trouble…
SMARTGUY on August 11 at 11:17 a.m.
The unemployment news had nothing to do with the market rise. This market is being driven by one thing, and one thing only GREED. All our problems in this country can be traced to the same cause, GREED. It is not enough to have more money then you can spend in a lifetime anymore, now you need more then you can spend in ten lifetimes, sickening when millions die every year from starvation.
lewis8457 on August 11 at 11:18 a.m.
less people applied for unemployment but hiring is stagnant what part of that looks good to the stock market?
sooner or later everyone but government will be unemployed used all benefits and then there will be no unemployment numbers to count but we will all be living on the street. But the stock market will be strong?
god help us all.
MrNatural on August 11 at 11:20 a.m.
Amen Smartguy…
Dazzeetrader11 on August 11 at 11:48 a.m.
It’s just a blip. Diatribes against those who worked, went to school, sacrificed won’t change anything.
Prospertity wiil not return to the US while this joke of a leftwing socialist, social justice president is in office. Just won’t.
America pushed back against the class warfare schtick of Obama and his devotees.
He has explored the differences in wealth and success for political purposes…(he likes it as most community organizers do). People took the bait in 2008 and some do now. See his popularity? Sinking like a rock.
You take the bait, you sink too….right along with Obama.
Free stuff to the voters works till there’s no more free stuff. Cultures of entitlement always fail….go build something or whine about your failures. Your choice.
Parenthetically, now is a very good time to get something done. The most successful capitalists are born in socialist systems. The change the left wants is only found in speeches…or in heaven.
Dazzeetrader11 on August 11 at 12:04 p.m.
http://i2.cdn.turner.com/cnn/2011/images/08/08/poll2.aug8.pdf
CNN poll……..Look at the turnaround since January 2011.
Speeches won’t matter anymore. He’s trying to hoodwink the voters. I’d say when a guy goes on vaca and drops a bundle when the country suffers is quite revealing.
Blaming Congress is empty. He is the loser on this. AMerica knows. He spent the money and sent $3.7 from the Fed to somewhere..not in the US. Won’t tell us where it went.
Look around you, he spent on nothing with a return to the US citizen. Everything he’s done is bad for the US. And if you disagree, tell us one thing he’s done that has improved your life. One. It’s a very short list.
fishinjay on August 11 at 1:05 p.m.
Just once I’d love to see a comment board have an intelligent discussion about a national issue without it turning into a ridiculous debate trying to pin a complex issue on a single person or even a single party. Any thinking person knows it’s not that simple, but I guess complexity isn’t something non-thinking persons are capable of grasping.
johnclarke on August 11 at 1:25 p.m.
agreed fishinjay. Wall Street was created to provide capital for business. This is not longer true. Wall Steet is nothing but a money making scam. With powerful computers making ultra fast and ultra high numbers of trades, the market can swing out of control in minutes. Traders are actually now trying to locate their super computers physically closer to cut milliseconds off of the trade time.
This should be stopped, like now. I think this will be regulated by the SEC but have not heard when.
http://www.nytimes.com/2010/05/07/business/economy/07trade.html
http://en.wikipedia.org/wiki/Algorithmic_trading
hawken on August 11 at 1:56 p.m.
It’s only “complex” when Obama liberals have totally driven the economy into the abyss, going deeper down and can’t defend the simple, obvious failure of their big government, tax, spend, borrow and print, actions.
It’s only then, the “simple” becomes “complex,” in order to confuse the simple.
Hiker on August 11 at 2:21 p.m.
fishinjay: The federal deficit is a symptom not the cause of our economic problems.
We all know the real problems:
- excessive healthcare costs (both public and private)
- lots of bad private debt being carried by the TBTF banks
- too many people in prison
- poor infrastructure
- trade policy that allows mercantilist countries to take jobs
- the costs of an aging population
- an inefficient and easily manipulated tax system
- insufficient tax revenue to cover the cost of government
- a patent system that hurts innovation
- significant underinvestment in R&D
- low savings rate
- etc.
Most of the above contribute to our unemployment rate.
The fundamental issue is how do we get the President and Congress to actually fix these problems. Solutions exist, although many of us will suffer some hardship. But both sides, especially the current crop of Republicans, are so inflexible and unable to compromise that nothing gets done.
The SR should consider switching to Facebook comments where people have to use their real names. It would reduce the trolls on these forums.
MrNatural on August 11 at 2:22 p.m.
It’s only “complex” when Boehner conservatives have totally driven the economy into the abyss, going deeper down and can’t defend the simple, obvious failure of their emaciated government, tax break, cut to incompetence, bilk and swindle, actions.
It’s only then, the “simple” becomes “complex,” in order to confuse the simple.
Dazzeetrader11 on August 11 at 2:32 p.m.
It’s a very myopic thinker who doesn’t or won’t understand what Obama’s done. Yes Obama…lots of money spent ( record amout) while the bills cannot be paid. Focus on the Kool Aid speech giver while you waste away. Pollyanna thinking won’t help this.
Go back and look at the BIG BIG crash. Wild swings in the market were normal.
Unemployment is nearing record high…..for the the past 40 years anyway. Grow some brains fishy… things are NOT well because you wish them to be wonderful.
The buck used to stop with the WH. Obama’s blamed everyone to deflect. No..sorry..it’s his and he’s caused terrible worsening. If he was a real man, he’d reiterate that the buck does indeed stop in his office…too bad he’s never in it.
fishinjay on August 11 at 2:57 p.m.
Dazzee, you’re nuts. Thanks for proving it publicly. I said nothing about “wonderful” or Polyanna thinking. Obama didn’t develop our economy in such a way that we’re intertwined with the rest of the world and their economic woes. Obama didn’t invent the largest part of our budget: entitlement spending. Obama didn’t build the largest part of the discretionary budget: defense spending. Obama didn’t single handedly pass the current budget, the Repulican led Congress had to vote for it too. In fact, there’s a lot more that guides our economy than just those simple things. There’s more impacting our economy than even the most brilliant economists can comprehend, which is why there are no easy solutions or single sources of our current woes. I’d like to have intelligent conversations about all of the things we can track without playing partisan games.
If you and the other right wing and left wing extremists want to over-simplfy and accuse to fit your partisan agendas, that’s on you. But don’t for a moment try to convince any of the rest of us that your ravings are facts. Acknowledging complexity and dropping partisan ravings are the first steps in “growing brains.”
Dazzeetrader11 on August 11 at 3:00 p.m.
growth in the “world of Obama” is supposed to be 4%…he’s said it over and over again. Is he clueless or just irrelvant? Here’s the numbers….
.Contributions to Percent Change in Real Gross Domestic Product
Government consumption expenditures and gross investment
Q4 2010 -0.58 <last quarter=”” od=”” 2010=”” q1=”” 2011=”” -1.23=”” <this=”” year=”” q2=”” 2011=”” -0.23=”” <this=”” year=”” the=”” “what=”” me=”” worrry?”=”” routine=”” is=”” just=”” about=”” as=”” crazy=”” as=”” it=”” gets.=”” he=”” has=”” no=”” plan.=”” ….if=”” he=”” does,=”” some=”” of=”” you=”” will=”” lap=”” it=”” up=”” like=”” honey.=”” reality=”” sets=”” in=”” soon=”” enough.=”” he=”” is=”” incompetent=”” to=”” even=”” understand=”” what’s=”” going=”” on…let=”” alone=”” fix=”” it.=”” he=”” wants=”” to=”” be=”” re-elected=”” so=”” he’ll=”” try=”” to=”” fool=”” you=”” (=”” as=”” he=”” apparently=”” did=”” last=”” time)=”” with=”” speeches.=”” rejoice=”” if=”” you=”” want….nothing=”” is=”” behind=”” his=”” eyes.=”” nothing.=”” and=”” it’s=”” nothing=”” personal.=”” he’s=”” a=”” great=”” guy..no=”” doubt=”” a=”” charmer=”” with=”” lots=”” of=”” fun=”” in=”” him.=”” he=”” should=”” not=”” be=”” president.=”” no=”” plan…just=”” more=”” befuddlement.=”” rmemeber=”” when=”” he=”” said=”” he’d=”” bring=”” those=”” overseas=”” jobs=”” back=”” here?=”” well..that=”” was=”” 3=”” years=”” ago=”” 2008.=”” whereabouts=”” are=”” those=”” jobs??=”” he=”” had=”” the=”” wh,=”” the=”” house=”” and=”” senate=”” for=”” his=”” first=”” 2=”” years…and=”” he=”” still=”” has=”” 2=”” of=”” them.=”” so…many=”” of=”” you=”” should=”” be=”” wondering=”” why=”” this=”” aricle=”” is=”” any=”” good=”” news=”” at=”“ all.=”“>
Dazzeetrader11 on August 11 at 3:47 p.m.
Something like this:
http://www.washingtonpost.com/politics/usps-proposes-cutting-120000-jobs-pulling-out-of-health-care-plan/2011/08/11/gIQAZxIM9I_print.html
Hiker on August 11 at 4:19 p.m.
Glad to see the USPS is finally streamlining. They also need to close the 3,700 unprofitable small town post offices.
Healthcare costs are killing all American businesses. Even Microsoft will soon require copays. Healthcare is also a huge headache for startups. Implementing a single payer system would result in a startup boom. Hopefully, Washington state will create one starting in 2014.
lynns on August 11 at 6:29 p.m.
This thread has been teetering for sometime and seems finally to have fallen into complete disconnection from the subject of the story. If personal sniping continues I’ll just freeze it. Thanks to those who try to stay on topic.
—Lynn, S-R Web producer
reservedparking on August 11 at 6:42 p.m.
Hawken: your ‘complex’ is actually ‘simple’:
8 years of the Bush/Cheney war machine combined with tax breaks for the wealthy. Add a dash of de-regulation, and you have where we ended up.
You don’t fix 8 years of damage of that magnitude in 3 - especially with a naysaying dysfunctional congress.
Simple. Keyneysian mumbo-jumbo has nothing to do with it.
The_Seer on August 11 at 8:10 p.m.
Who else loves it when Dazed tries to work html?
misjustice on August 11 at 8:38 p.m.
I do! And I said so, in a nice way, but my post got removed…this one probably will too.
misjustice on August 11 at 9:18 p.m.
Stocks soar, stocks slump, stocks rebound, stocks plummet, stocks recover, stocks decline, and so it goes. The stock market is arbitrary and capricious…
maria on August 11 at 9:31 p.m.
I like Dazee’s post. It’s like 2001, A Space Odyssey….but without all the cool low and slow singing by HAL.