A Word on this Week's Seesawing Markets

Thursday, May 27, 2010

Let’s see. Yesterday, stock markets traded in positive territory throughout the day. But then, suddenly in the last hour, markets dropped sharply, and the Dow closed below the 10,000 mark for the first time since this February. The Dow has lost 11 percent since April 26, when it hit a high of 11,205. Now, the Dow is definitely in “correction” territory.

But this morning, the markets completely reversed course and shot up at the start of the trading. We’ll have to wait to see if the better mood holds throughout the day.

All this activity begs the question: What’s moving the markets? Before getting to the specifics of the day on Wall Street, check out this report from WNYC’s Lisa Chow, which examines why the markets have been on such a wild ride recently. One reason, she suggests, is that it’s all in your head.

As for today, a big reason that the markets are on the rise are the assurances from Chinese officials that China has no plans to sell the European debt it currently holds. With investors still worried about Europe’s economy and the possibility of some countries possibly defaulting on their debt, the Bank of China's announcement cheered investors.

China's announcement covered up some disappointing economic news in the U.S. The Labor Department reported that weekly initial jobless claims fell, but by less than what economists had predicted. “This is another disappointing claims report,” Ian Shepherdson, chief U.S. economist for High Frequency Economics. Economists had expected 455,000 jobless claims instead of the actual number of claims, 460,000. That difference has some people worried that employers, especially small businesses, are not hiring as many people as they had been hoped.

Add that news to another government report released that found the U.S. economy grew by only 3 percent in the first three months of this year--worse than the previous 3.2 percent estimate.


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