Small but positive economic signs lift market

Wall Street's wildest week since 2008 continued with another 300-point move for the Dow on Thursday at midday.

This time, stocks shot up after investors saw small signs that the economy isn't 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 gold prices down from record highs and sent prices on long-term Treasurys down.

The Dow Jones industrial average rose 283 points, or 2.6 per cent, to 11,003 at 12:38 p.m. in New York. It had been up as many as 309 points a little before 11 a.m.

During a calm market, a 300-point move would rank as the Dow's biggest in months. This week, it's the smallest.

The Dow has been volatile all week. On Monday, it plunged 634 points only to gain 429 points Tuesday and sink 519 points Wednesday.

It's the first time that the Dow has moved by more than 400 points in three straight days since November 2008, when markets were tumbling during the financial crisis.

Carlton Neel, who manages about US$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.

Thursday'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 US 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.

The S&P 500 index rose 33, or three per cent, to 1,154. The Nasdaq composite index rose 74, or 3.1 per cent, to 2,456 at midday.

In Europe, the leaders of France and Germany, the region's biggest economies, said they will meet next week to talk about how to solve Europe's financial difficulties.

Worries that Europe'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 US banking industry and economy because the global financial industry is so closely linked. That has been one reason stocks have declined in the last several weeks.

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

In the bond market, 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 2.21 per cent from 2.11 per cent 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 per cent Tuesday afternoon. Treasurys have held onto their reputation as a safe place to put money even after S&P cut the US 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 $1,771.10 in intra-day trading Thursday.

- AP