Volatile market has opportunity

NEW YORK – Triple-digit swings in the Dow Jones industrials the past two weeks might seem like a painful reminder of the volatility that devastated Wall Street in the early part of the decade. But the turbulence might actually reflect more prudence than panic.

Investors were shell-shocked after the technology bubble burst in 2000 and sent stocks plummeting from record levels. The road back has been slow, a reflection of the market’s more conservative stance.

Now, the sort of declines Wall Street has been seeing lately seem to be growing not only out of worries about interest rates or the economy, but also out of investors second-guessing themselves.

The past two weeks, investors sold stocks off when they realized they’d gotten ahead of the Federal Reserve in expecting an interest rate cut this year. Fed Chairman Ben Bernanke helped set off some of the triple-digit selling when he talked of the economy’s health – something unlikely to help push the Fed toward a rate drop.

Stocks had surged during the spring on growing expectations that rates would indeed be coming down.

By the middle of this past week, investors were taking another look, and, aided by better than expected inflation data, realized they had again overdone it, this time on the down side. So, stocks regained much of their losses from the previous week.