Dow soars 423 as roller-coaster market rolls on

The market reverses Wednesday's big loss on short-covering and a larger-than-expected decline in jobless claims. Financial stocks rebound. Cisco Systems and News Corp. rally. Gold and silver fall. Short-selling of French banks is halted.

By Charley Blaine Aug 11, 2011 12:49PM
Charley BlaineUpdated: 8:15 p.m. ET

Stocks rallied sharply higher today, but, given the market's performance this week alone, an investor would be well within his rights to be at least a little skeptical of the rally's durability.

The Dow Jones Industrial Average ($INDU) briefly jumped as many as 559 points before dropping back to a gain of 423 points -- its 12th-largest point gain ever -- and recovered 80% of its 520-point loss on Wednesday. The blue chips have been up or down at least 400 points every day this week for the first time ever, The Wall Street Journal noted.

The Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) recovered all of their Wednesday losses.

The catalysts for today's rally were a better-than-expected report on weekly jobless claims and gains for Cisco Systems (CSCO) and embattled media giant News Corp. (NWSA). Shares of both companies jumped at least 16%. Plus financial stocks, battered badly on Wednesday, were higher as European stocks rebounded. 

The Dow closed up 423 points, or 4%, to 11,143. The S&P 500 added 52 points, or 4.6% to 1,173, and the Nasdaq was up 112 points, or 4.7%, to 2,493.

Article continues below.
This started as a nice bounceback rally, then morphed into a huge short-covering rally. Short-sellers who had sold shares short expecting the market to move lower were forced to buy the shares back to cover their positions.

The problem with short-covering rallies is they can be agonizingly short. The size of the rallies (as well as the declines) suggest investors are very uncertain about what to expect in the economy going forward.

The Dow is off 2.6% this week, with the S&P 500 down 2.2% and the Nasdaq 1.6%. For the year, the Dow is off 3.8%, with the S&P 500 down 6.8% and the Nasdaq down 6%.

The market got a nice boost from a Labor Department report estimating that initial jobless claims unexpectedly fell by 7,000 to 395,000 in the week ended Aug. 6. The claims rate has hovered around 400,000 for the past three weeks.

The rally pushed interest rates higher; the 10-year Treasury yield was at 2.336%, up from Wednesday's 2.137%. Rates also moved higher after an auction of 30-year Treasury bonds produced a yield of 3.75%, higher than expected.

After the close, shares of chip-maker Nvidia (NVDA) and upscale department-store chain Nordstrom (JWN) were higher after both reported results that beat Street estimates. Nvidia was up 18.6% after hours to $15.90; Nordstrom was up 3.2% to $43.70.

Will Friday be another tough day?
The market has been wildly volatile in the last few weeks, but today's Dow performance and the seven prior days have been especially so.

Since Aug. 2, when the Dow fell 266 points, the next day has produced a gain -- some small but some quite large, like Tuesday or today. So does that mean watch out for Friday? Maybe.

Futures trading suggests a modestly lower open for Friday.

The Commerce Department reports on June retail sales. The University of Michigan's Consumer Sentiment Index is due. JC Penney (JCP) and Brazil's big oil company Petrobras (PBR) will report quarterly results.

The Dow 's roller-coaster days
Date

Dow close

Point chg.*
8/11/2011

11,143.31

+423.37
8/10/2011

10,719.94

-519.83
8/9/2011

11,239.77

+429.92
8/8/2011

10,809.85

-634.76
8/5/2011

11,444.61

+60.93
8/4/2011

11,383.68

-512.76
8/3/2011

11,896.44

+29.82
8/2/2011

11,866.62

-265.87
*From prior session

If that's not enough, the gap between the Dow's daily high and low has been 400 points for the past six days. That's happened only twice before, both in October 2008 during the worst of the financial crisis. The first of those streaks lasted 12 sessions, between Oct. 3 and Oct. 20.

Financials foreign and domestic see a rebound

European stocks -- especially bank stocks -- were higher today after French President Nicolas Sarkozy and German Chancellor Angela Merkel scheduled a meeting for Tuesday to discuss proposals to strengthen the eurozone's economic governance.


Late today, France banned short-selling on stocks of all French banks.


The European rally spread to U.S. financial stocks as well. Both had been hit hard Wednesday amid rumors and worse that a major French bank, possibly Societe Generale (SCGLY),  was in deep trouble. Societe Generale pointedly denied any problems. 


Today, however, the shares of the three biggest big French banks, including SocGen, as many call it, rallied in U.S. trading.


Societe Generale was up 5.3% to $6.80. BNP Paribas (BNPQY) added 4.1% to $26.12. Credit Agricole (CRARY) was up 6.7% to $4.59.

In the United States, meanwhile, Bank of America (BAC) rose 7.1% to $7.25, a day after its top management, including CEO Brian Moynihan, spent two hours on a conference call with investors trying to explain their business, risks and strategies.

Citigroup (C) was up 6.3% to $30.29. JPMorgan Chase (JPM) was up 6.8% to $36.69. Capital One (COF), which announced Wednesday a deal to buy HSBC's (HBC) U.S. credit-card business, added 7.5% to $44.14. HSBC was up 6.2% to $44.10 in New York.

Energy prices -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$85.72

$82.89

-10.43%

-6.19%
(per barrel)











Heating oil (-HO)

$2.8992

$2.8653

-6.36%

13.98%
(per gallon)











Natural gas (-NG)

$4.1080

$4.0030

-0.89%

-6.74%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.8273

$2.7825

-7.54%

15.25%
(per gallon)











Brent crude 

$108.02

$106.68

-7.47%

14.01%
(per barrel)











Retail gasoline

$3.6200

$3.6370

-2.43%

17.84%
(per gallon; AAA)












Oil prices move higher
Energy shares pushed higher as crude oil (-CL) continued its rally from Tuesday's closing low of $79.30 a barrel.

Light sweet crude rebounded to $85.72 a barrel, up $2.83. Brent crude was up $1.22 to $107.90 a barrel.

There is a theory among some analysts that the resilience of crude prices in the last few days is a signal of decent demand -- and therefore evidence the domestic economy at the very least isn't falling apart.

Exxon Mobil (XOM) was up 5.2% to $71.58. It was able to reclaim its rank as the top stock  by market cap from Apple (AAPL). Apple finished up 2.8% to $373.70. But Exxon's market cap was $348 billion to Apple's $346.5 billion.

Meanwhile, the Energy Select Sector SPDR (XLE) exchange-traded fund was up 5.2% to $66.47. The ETF tracks the energy sector of the S&P 500.

Gold falls as margins increase
While stocks were up, gold (-GC) was not. In fact, gold for December delivery settled down $32.80 to $1,751.50 an ounce after CME Group, which owns the U.S. futures exchange where gold is traded, boosted margin requirements by 22%. That makes speculating in gold more expensive.

The move knocked the SPDR Gold Shares (GLD) exchange-traded fund down 2.2% to $171. The ETF is still up 23% this year.

Silver (-SI) for September delivery also fell 65.8 cents, or 1.7%, to $38.669 an ounce on the news. The CME raised margin requirements on silver in May when it hit $50 an ounce.

Cisco and News Corp. see big gains
Cisco was up 16% to $15.92 after reaching as high as $16.21. The company beat Street estimates on its fiscal-fourth-quarter earnings and forecast earnings for the fiscal first quarter higher than expected as well. Three analysts either upgraded their rating on the shares or boosted price targets.

Cisco's results helped tech stocks generally move higher. Chip stocks had a big day with the Philadelphia Semiconductor Index ($SOX) up 5.2% to 357. All of the stocks in the index were higher.

News Corp. was up 18.1% to $16.19 after the company's fourth-quarter results bested Wall Street estimates. Adjusted fourth-quarter earnings came in at 35 cents a share on revenue of $8.96 billion. Analysts had forecast earnings of 32 cents a share on revenue of $8.46 billion.

The results came despite the continuing scandal in Britain over illegal hacking of cellphones by staff of the company's now-shuttered News of the World. CEO Rupert Murdoch said he doesn't plan to retire.

Short hits from the markets -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.010%

0.020%

-88.89%

-91.67%
5-year Treasury note 

0.988%

0.929%

-28.04%

-50.99%
10-year Treasury note

2.336%

2.137%

-16.72%

-29.32%
30-year Treasury bond

3.787%

3.538%

-8.35%

-13.18%
Currencies











U.S. Dollar Index

74.81

74.769

1.05%

-5.65%
British pound

1.6228

1.6139

-1.25%

3.99%
(in U.S. $)











U.S. $ in pounds

£0.616

£0.620

1.27%

-3.84%
Euro in dollars

$1.42

$1.42

-1.22%

6.35%
(in U.S. $)











U.S. $ in euros

€ 0.703

€ 0.706

1.24%

-5.97%
U.S. $ in yen 

76.98

76.76

-0.08%

-5.39%
U.S. $ in Chinese

6.42

6.42

-0.66%

-3.01%
yuan











Canada dollar

$1.014

$1.006

-3.16%

1.06%
(in U.S. $)











U.S. dollar 

$0.987

$0.994

3.27%

-1.05%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,751.50

$1,784.30

7.57%

23.22%
(per troy ounce)











Copper (-HG)

$4.0085

$3.889

-10.51%

-9.86%
(per pound)











Silver (-SI)

$38.669

$39.327

-3.58%

24.99%
(per troy ounce)











Wheat (-ZW)

$7.0125

$6.8500

4.28%

-11.71%
(per bushel)











Corn (-ZC)

$7.1400

6.885

7.29%

14.70%
(per bushel)











Cotton 

$0.9779

0.9916

-4.20%

-32.47%
(per pound)











Coffee

$2.4085

2.3485

0.54%

0.15%
(per pound)











Crude oil (-CL)

$85.72

$82.89

-10.43%

-6.19%
(per barrel)










 

279Comments
Aug 11, 2011 1:05PM
avatar
I don't care at this point whether it goes down or up...I still feel  MAD AS HELL AND I AM NOT GOING TO TAKE IT ANY MORE!

once again, here we are...pointing fingers at the left, at the right, at anyone but ourselves.

We are the problem and we are the solution.

We voted these idiots into office and we have the power to vote them out.

I read, time and time again that the biggest reason for the down grade that has and will continue to derail any recovery is largely due to the dysfunction in Washington shared by all political parties.

I am going to cross party lines or not,  to vote for any new candidate... Incumbents should be voted out at all costs.

The new crew coming in should be warned and we should make it very clear that they will assume the same fate if they do not fix what is wrong. Starting with themselves and their privileged benefits package and open ended compensation.

They should be forced to live with the same type benefits and wages as the rest of the working class. 

After all do we not own them...are they not in office to represent us?

Come on America...we don't take crap from the commies, the bullies or any other county on this planet...why do we roll over and take this from our own...more important why are our politicians doing this to their own...come on America...spread the word!

WE ARE MAD AS HELL AND WE ARE NOT GOING TO TAKE IT ANY MORE!

Do you hear that Washington...it's footsteps and we are coming for you!!!

It starts off as one set and grows and grows until you can't stop it...and we are coming for you so you better sleep with one eye open, your days are numbered!

or not...actually I am kinda busy...have some shopping to do, run the kids around to events, watch sports and what was I talking about, can't remember...anyways GO VIKES!

Aug 11, 2011 1:27PM
avatar
What a laugh - stocks up on better than expected unemployment news. Tomorrow stocks will be down on less than expected news regarding jobs - okay, which is it?  Every day a different story

The only reason the unemployment news is better is FALSELY because people's benefits have run out, and they are no longer factored into the unemployment picture. How much you want to bet that the real unemployment picture is far worse than the what, 9.1 that they say it is?!?

This is almost as funny as hearing the another recession might be looming. When did the last one end? They say it was 2 years ago - what a joke.
Aug 11, 2011 1:29PM
avatar

Don't care if it goes up or down....its not the same market and it is not the same America.  We are living in a different land now, and until the US Government understands they provide services to us, it will remain this way.   WE MUST VOTE THESE PEOPLE OUT, AND THEN WE MUST KEEP THE GOVERNMENT IN ITS PROPER ROLE.   I am with ODSTN on this one. 

 

I am mad as hell, and I am not going to take it anymore.  I am going to write and talk and never give up.  The Wall Street/Fannie Mae and Freddie Mac destruction of this country needs to stop.  Why do the banks have TRILLIONS of dollars in reserve, and WILL NOT loan an entrepreneur one dime to grow her business.  The taxpayer who bailed out the bank cannot borrow money.  Why? because the Wall Street Wizards decided to bundle residential properties and sell them as a no risk investment because American real estate never depreciates.   Ha, ha, wizards;  I guess you were wrong about that.   

avatar
All I can say is HOW DO YOU LIKE THE CHANGE.....the only change I have is in my pocket.  While Obama is in Martha's Vineyard, I can't afford to stay at Motel 6 .
I can't afford the gas to get to a motel 6 Let alone stay at one .
Talk about being detached from the American people . This President is so detached from us he is on vacation ! 

Aug 11, 2011 1:39PM
avatar

The rich, including Obama, continue to get richer and the poor continue to get poorer.  Who is paying the bills...the so called middle class.

Ya, pass another bill to give more money to the poor that destroy housing and etc they are provided from tax money from the middle class.  Why do the politicians want to pass the bill...to get re-elected.

Aug 11, 2011 2:03PM
avatar
Jay:  The problem is that if you vote the present incumbents out....you'll just get a NEW bunch of idiots!  As long as corporations and lobbyists can "buy" campaigns, you and I dont' make much of a difference.   There's no longer any such thing as a government "for the people, by the people, and of the people."  We have now become a Corpocracy, NOT a democracy!!
Aug 11, 2011 2:06PM
avatar

All these ups and downs are a game played by the day traders skimming the money from the long term investors. Day trading should be regulated and profits should should be taxed with a huge tax bracket.

Damn scumbags of wallstreet speculators, they think it is a casino  !

Aug 11, 2011 1:51PM
avatar

ok it is up from where it bottomed out yesterday , but  is it back to where it was before the big drops on monday and wed. no far from it. it is like playing play the lottery spend $100.00 to win $20.00  you think you are winning until you think about it , hey I am really down $80.00.

 

what a joke up 300 pts after dropping 1,000 your still down 700 pts right?

Aug 11, 2011 2:18PM
avatar
Wow! Cisco went up ...but aren't they laying off 6500 people.  That's a quick way to give your bottom line a boost.
Aug 11, 2011 1:35PM
avatar
Somebody is definitely plucking these strings, and i think we should be looking for the source rather than being dazzled by the effect.
Aug 11, 2011 1:24PM
avatar
I'd rather put my treasures in heaven - even though it is not popular to believe in God.  I'd rather be thought a fool by men then not know the true God and creator.  I'd rather invest in spreading the faith, hope and love the gospel brings than having a fancy car and mansion on earth.  Take stock in what God has to offer and not man His return is guaranteed and it will never be worth zero.
Aug 11, 2011 2:15PM
avatar
Wow, jobless claims drop by 7,000 and the market goes wild. That number probably equals the amount of filers who have exausted their benefits. This is more Wall Street BS at its best. They will use aything and everything to line their pockets. They are so out of touch with main stream Americans. This is so pathetic.
Aug 11, 2011 1:56PM
avatar
Again, this could not be more obvious.  All this means nothing other than to the same 'manipulators' who by doing this continue to devalue the dollar in the shorter term, now.  We are being sold down the river, but so are they selling themselves.  They just do not know it quite yet.  It is coming for those, you know what, and it will hurt more than they can imagine.  This whole thing is a complete and entire disgrace to all citizens in our country.
Aug 11, 2011 1:51PM
avatar
Ride the wave,its all unrealized gains and losses until you cash out.
Aug 11, 2011 2:08PM
avatar
Did it ever occur to them that the majority of the 7,000 claims are probably those who have lost eligibility, and are without any income at all, and probably unable to find work. And what about all the agencies Fannie and Freddie and all the others that were just downgraded... And yet, stocks rise on the slightest, insignificant positive news (only in an continued attempt at false hope and us knowing it is nothing but smoke and mirrors)....my belief and trust in the government and wall street is equal to the distance I can throw them, 0. If you haven't seen the rant by Dylan Ratigan, go to youtube and check it out...great stuff. Congress, the POTUS...everyone, is bought. This country is corrupt as it gets.
Aug 11, 2011 1:11PM
avatar
This market will stay up until every last stock is sold from the big players.....Then the little investor can eat crow.
Aug 11, 2011 2:47PM
avatar

My son said the other night you wonder why there are so many drug dealers, they pay no taxes, its big money and they will never be unemployed as long as there are stupid people in this country.

 

Aug 11, 2011 2:41PM
avatar
It took millions of people and their sacrafice to build up a country and only one to tear it down.
Aug 11, 2011 1:45PM
avatar
the past week there has been a pattern down 600 points,, then up 400 then down 519 now up 350 or soo..... does anyone notice the days down were > than the days the market gained.  guess what tomorrow will bring down probably 700-800
Aug 11, 2011 1:10PM
avatar

Its a numbers game, speculators knowing how to play the panic button. If you know the game you can get wealthy if you don't know the game and continue playing it your going to feel like somebody grabbed you by the ankles turned you upside down and shook you out so now your broke. it's all due to somebody told the world that its in dire economic condition and caused a panic of sorts. The world needs to get off it and move forward.

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