Dow ends week on positive note

US stocks ended sharply higher today, a day after posting their biggest falls in more than a year.

Trading was volatile on Friday, and there are still worries about how Europe is handling its debt crisis. Analysts said a bounce-back after yesterday’s slide wasn’t surprising.

The Dow Jones industrial average rose 125 points after falling below 10,000 in morning trading.

The volatility comes after major indexes entered “correction” mode, having dropped more than 10% from their 2010 highs set last month. Today‘s gains pulled the Dow back out of correction territory and left it down 9% from its peak.

Investors again looked to Europe for direction. The German parliament approved the country’s share of plans to help contain debt problems in the European Union. Major stock indexes in Europe were mixed but pulled well off their lows. Traders have been worried that stronger countries like Germany and France will be saddled with heavy debts to help weaker EU countries.

The euro rose to €1.2574 (86.8p) from €1.2464 (86p). The 16-nation currency has been a big driver of trading for weeks but many traders have been sceptical that any advances will be short-lived.

World markets have been falling on concerns that European debt problems will slow or maybe even stop a global rebound. The fear is that huge deficits in countries including Greece and Portugal will cause a wave of bad debt to race through the world’s financial system.

Even if that is prevented, the prospect of heavier borrowing and sluggish growth has traders concerned.

It is impossible to know whether the market is in for more than a correction, but analysts say that the fear has not turned to panic like it did during the market’s slide in late 2008 and early 2009.

“The likelihood of a double dip here is, I think, being really exaggerated,” said Stu Schweitzer, global markets strategist at JP Morgan’s Private Bank in New York, referring to the prospect of another recession.

He also said he expects the market will stabilise.

According to preliminary calculations, the Dow rose 125.38, or 1.3%, to 10,193.39. The broader Standard & Poor’s 500 index rose 16.10, or 1.5%, to 1,087.69. The Nasdaq composite index rose 25.03, or 1.1%, to 2,229.04.

The Dow had last fallen below 10,000 on May 6 when it lost nearly 1,000 points in an afternoon rout that was the biggest ever intraday slide. Regulators have said they are still unclear on what caused the brief drop.

The Dow tumbled 376 points yesterday. The Dow and the S&P 500 index fell more than 3%, while the Nasdaq lost 4.1%. The drop erased the gains major indexes had made in 2010.