Wall Street Finishes Wild Week on a High Note

UPDATE: The Dow Jones average gained more than 120 points Friday, marking the first time the blue-chip index has posted back-to-back gains in more than a month.

The Dow finished the week at 11,269, up a little more than 1.1 percent on the day, according to preliminary results.

Friday's gains weren't enough to push the Dow above where it started the week Monday, coming up about 170 points shy. Still, given Monday's 625-point drop and Wednesday's 520-point loss, most investors likely let out a long sigh of relief when Friday's closing bell brought trading to an end for the week.

"Traders and investors are at a point of absolute exhaustion. The back and forth action is draining," Gary Flam, portfolio manager at Bel Air Investment Advisors, told the Wall Street Journal. "Investors are just waiting now to see what the market has in store for next week."

UPDATE Friday at 10:05 a.m.: Wall Street continued to rally Friday morning, with the Dow Jones average and other major indexes gaining nearly 1 percent in early trading.

The gains, which follows Thursday's 400-plus point jump for the Dow, came after the retail sector delivered investors a dose of (relatively) good news. Consumer spending rose 0.5 percent in July, with Americans spending more on gasoline, electronics and other merchandise.

"The data shows all the wheels aren't falling off the U.S. economy," Seth Setrakian, co-head of U.S. equities at First New York Securities, told the Wall Street Journal. "It's not great, but it's sluggish and consistent with the slow growth profile the economy has been exhibiting."

UPDATE Thursday at 4:21 p.m. Wall Street's fast start Thursday morning gained steam throughout the day, as the Dow Jones average closed at 11,142, up 423 points on the day.

The S&P 500 gained roughly 52 points to finish the day at 1173, according to preliminary numbers, the first time that the index has had swings of 50 points or more for four straight sessions. The NASDAQ, likewise, posted big gains, climbing 112 points to close at 2,493.

The New York Times credited the market's strong day to bargain-hunting investors, positive economic data and decreasing concerns over Europe's finances.

UPDATE Thursday at 10:22 a.m.: In a bit of a surprise, claims for unemployment insurance payments in the U.S. dropped last week to a four-month low, the Labor Department announced Thursday.

The good news did two things: 1) It signaled that "the recent slowdown in payroll gains was caused by a lack of hiring rather than more firings," Bloomberg reports. 2) It also helped U.S. stocks rebound from Wednesday's 11-week low, with the Dow gaining nearly 200 points in early trading Thursday.

Although if the past few days have been any indication, the market is likely in for yet another volatile day.

UPDATE Wednesday at 4:21 p.m.: The Dow Jones fell by more than 500 points Wednesday, the third such drop in the past week.

The Dow dropped 520 points, or 4.6 percent, to 10,719, according to preliminary results. That was enough to erase Tuesday's rebound, and left investors worried that worse is yet to come.

"The market can go from euphoria to depression at the flick of a switch," Chris Brown, portfolio manager of the Pax World Balanced Fund, told the Wall Street Journal. "People are concerned about France's ratings, and the banks are under an extreme amount of pressure."

Standard & Poor's 500 fell by roughly 52 points, or 4.4 percent, and the NASDAQ lost 101 points, or 4.1 percent.

UPDATE Wednesday at 10:03 a.m.: Here we go again.

The Dow Jones average plunged more than 300 points in early trading Wednesday, setting the stage for what is likely going to be another wild day.

UPDATE Tuesday at 4:09 p.m.: The Dow Jones rallied in the final hour of trading Tuesday to finish up 430 points on the day.

The Dow gained roughly 4 percent and closed at 11,240, according to preliminary results, making up more than two-thirds of the amount the index dropped Monday in the first day of trading since S&P downgraded the U.S. credit rating.

The S&P 500 and the NASDAQ saw similar gains, climbing 4.75 percent and 5.3 percent, respectively, according to Reuters.

UPDATE at 2:33 p.m.: The Federal Reserve on Tuesday promised to keep its benchmark interest rate a record low for at least the next two years in a bid to revive the ailing economy.

According to Bloomberg, the move "represents the biggest effort since November to spark the U.S. economy and revive confidence while stopping short of initiating a third round of large-scale asset purchases."

The U.S. stock market, meanwhile, has been all over the place today. The Dow Jones average and other indexes rallied to open the day on Wall Street, before retreating sharply. The index dipped into the negative briefly, but now appears to be holding relatively steady.

UPDATE No. 10 at 10:37 a.m.: The Dow Jones is now back up above 11,000 after gaining more than 200 points (or about 2 percent) in early trading Tuesday. The S&P 500 and the NASDAQ are, likewise, off to a good start, climbing 2.6 and 3.2 percent, respectively.

It will undoubtedly be a long and volatile day, but the early start is obviously a relief given Monday's historic market drops.

Tuesday's gains are likely due, at least in part, to investors speculating that the Federal Reserve may soon announce plans to safeguard the economy.

“The market has convinced itself that [Ben] Bernanke is going to, or has to, say something to calm the markets,” Wayne Lin, a money manager at Legg Mason, told Bloomberg. “It’s a matter of confidence. After yesterday’s drop in stocks, investors are hoping that the administration has gotten the message that they need to get their act together.”

UPDATE No. 9 TUESDAY at 9:59 a.m.: Finally some good news.

The global stock market sell-off of the last two weeks may be letting up. Stock indexes rose in the U.S. shortly after the opening bell on Wall Street.

The Dow Jones average climbed nearly 1 percent, and S&P's 500-stock index and the NADSAQ were both up more than 1 percent in early action.

UPDATE No. 8 MONDAY at 4:34 p.m.: Wall Street's bad day only got worse as it went on.

The Dow Jones average closed Monday down 633 points to 10,813, its largest point loss in a single day since December 2008. The Standard & Poor's 500 stock index, likewise, tumbled 78 points to 1,123, and the NASDAQ tumbled 168 points to 2,364, according to preliminary closing figures.

UPDATE No. 7 at 2:15 p.m.: President Obama on Monday defended the nation's economic credibility, saying that despite the S&P downgrade the U.S. has "always been and always will be a triple-A country."

The president, making his first public remarks since Friday's downgrade, was quick to point to Washington's partisan bickering as a key factor in the credit rating agency's decision to strip the U.S. of its triple-A rating. He said that the nation's real problem is "a lack of political will" and that lawmakers must "tackle our deficits over the long-term."

"We didn't need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction," Obama said.

Meanwhile, Wall Street's rough day continued. The Dow has dropped 450 points since trading opened this morning, and has now fallen below the 11,000-mark for the first time since last November.

“Markets will rise and fall, but this is the United States of America," Obama said. “No matter what some agency may say, we’ve always been and always will be a triple-A country."

Obama than closed his remarks by pivoting to the U.S. casualties in Afghanistan over the weekend. "Their loss is a stark reminder of the risks that our men and women face every day," he said. “We will press on and we will succeed. Now is the time to remember those we lost."

UPDATE No. 6 at 12:56 p.m.: The president has pushed back his remarks until 1:30 p.m. We'll update afterward, but for now the Wall Street Journal has this tidbit that will likely do to little to soothe skittish investors.

S&P on Monday began marking down the credit ratings on some U.S. insurance companies based on "direct and indirect sovereign risks" ties to the U.S. credit downgrade. Warren Buffett's Berkshire Hathaway, which makes a large portion of its profits from its insurance and reinsurance businesses, was spared a downgrade but the S&P did drop the company's outlook from "stable" to "negative."

As the WSJ notes, Buffett hasn't exactly held his tongue when it comes to S&P, saying that it's decision to downgrade the U.S. "doesn't make sense." Buffett, known as "the Oracle of Omaha," is himself a large shareholder in Moody's, a rival credit rating agency.

UPDATE No. 5 at 11:51 a.m.: The New York Times spoke to Jonathan Corpina, a broker on the floor, to gauge the mood of traders and investors during this morning's frantic action. Here's how Corpina, of Meridian Equities Partners, put it:

"The room is definitely louder. You are seeing a lot more activity. There is a lot more intensity. ... This is something that none of us have ever experienced before in our business. We don’t know what the ripple effects are going to be."

The Dow is currently down 287 points, or 2.5 percent; the S&P has fallen 38 points, or 3.1 percent; and the NASDAQ is down 85 points, or 3.4 percent.

UPDATE No. 4 at 11:20 a.m.: President Obama will hold a press conference at 1 p.m. EST.

UPDATE No. 3 at 11:21 a.m.: S&P has a message for the United States: Don't expect to get your triple-A rating back anytime soon.

"We still think that the risks to the rating are still pitched to the downside - that's why we have a negative outlook," David Beers, the agency's head of sovereign ratings, said in a conference call Monday, the BBC reports. "We don't anticipate a scenario at the moment in which the U.S. would quickly return to AAA."

And how can Washington fix the problem? In short, bipartisan compromise and government stimulus.

Beers: "If [there were] broader consensus among parties about how to make fiscal policy choices over the medium-term horizon and in turn that translated into a more substantial and more robust fiscal stimulation package, those two things could together in time lead to the rating returning to AAA.

"But given the nature of the debate currently in the country, with the polarization of views across the country right now, we don't see anything immediately on the horizon that would make this the most likely scenario."

UPDATE No. 2 at 11:03 a.m.: Standard & Poor's owner McGraw-Hill may be taking "collateral damage" for the rating agency's decision to downgrade the U.S.'s credit rating, the Wall Street Journal notes.

McGraw-Hill, which stressed over the weekend that it had no involvement with the downgrade, has seen its stock price fall more than 8 percent in early trading Monday. The S&P unit generated about one-quarter of the company's $6.17 billion in total revenue last year, according to the WSJ.

Meanwhile, the Dow Jones average has now fallen more than 300 points.

UPDATE No. 1 at 10:52 a.m.: More bad news from Standard & Poor's. The credit rating agency on Monday downgraded the debt of mortgage finance giants Fannie Mae and Fredd Mac.

The downgrades from triple-A to AA+ are not unexpected, given that it was “widely expected that S&P’s downgrade of U.S. debt would roll downhill to other entities that are closely linked to the federal government,” CNN reports.

ORIGINAL POST at 10:32 a.m.: Wall Street reacted how everyone thought/feared it would when the market opened Monday morning for the first time since Standard and Poor’s stripped the U.S. of its prized triple-A rating.

The Dow Jones Industrial Average dropped 214 points, or 1.9 percent, to 11,231 shortly after trading opened. The story was the same for other indices, with S&P’s 500 dropping 28 points, (or 2.4 percent) to 1,171 and the NASDAQ Composite falling 70 points (or 2.8 percent) to 2,463.

“It’s panic selling,” Jeffrey Saut, chief investment strategist at Raymond James & Associates, told Bloomberg. “There are no fundamental reasons for the selloff. We’re not going into a recession. We had a terrific earnings season. Now is not the time to panic. This is where you start to put cash back to work.”

Other analysts, however, offered a more half-full assessment of the market’s early performance.

“It is by no means a disaster,” Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott, told the New York Times, adding that the relatively limited declines suggest investors had already factored in the downgrade.

Panic or not, the drop was expected. The Wall Street Journal notes:

In a sign of the rocky market activity expected Monday, the New York Stock Exchange invoked the little-used Rule 48 to allow designated market makers to refrain from disseminating price indications ahead of the opening bell. The rarely used procedure makes it easier and faster to open trading when the action is expected to be especially volatile.