Dow ends wild week on high note

The wildest week in Wall Street history ended with a second day of gains.

The Dow Jones industrial average finished today with a gain of 125 points. Most other times it would have been a fairly big day. By this week’s standards, it was a sleeper. Friday capped a week when the blue-chip index had four 400-point swings in a row for the first time in its 115-year history.

Trading was frantic across financial markets all week. The yield on the 10-year Treasury note hit a record low. Gold briefly topped 1,800 dollars per ounce. Nearly every one of the 500 stocks that make up the Standard & Poor’s 500 index ended down midweek.

“It was a sharp and violent week in the stock market, but it’s my sense that the worst is over,” said Michael Kaufler, a portfolio manager at Federated Investors.

The Dow finished on Friday with a gain of 125.71 points, or 1.1%, to 11,269.02. It finished the week down 1.5% after being down as much as 6.3% for the week.

The broader S&P 500 index rose 6.17 points, or 0.5%, to 1,178.81. It finished the week down 1.7%.

The technology-focused Nasdaq composite rose 15.30, or 0.6%, to 2,507.98. It lost 1% for the week.

All three major stock indexes are now down more than 10% from their April highs. That is a big enough drop to signify what traders call a market correction. A drop of more than 20% signifies a bear market, a period of sustained losses.

The Dow dropped 634 points on Monday, its sixth-worst point drop ever, as investors responded to Standard & Poor’s withdrawal of the country’s AAA credit rating. It was the first downgrade of US government debt in history. The Dow rose 429 points on Tuesday, only to plunge 519 points on Wednesday. It surged 423 points on Thursday following a better than expected drop in new applications for unemployment benefits.

A rebound in retail sales in July pushed the stock market higher today as traders looked past a Reuters/University of Michigan survey that found that consumers were pessimistic about their own finances and the economy. The measure of consumer sentiment fell to a 30-year low.

It was the first time since early July that the Dow and S&P index rose for two consecutive days.

The strong retail sales added to other bits of more positive data about the economy. The government said last week that hiring picked up slightly in July after two dismal months, though employers still are adding jobs too slowly to significantly reduce unemployment. A Thursday report showed applications for unemployment benefits fell to a four-month low. Some analysts believe recently announced layoffs will cause that number to rise in the coming weeks.

A separate government report today showed that businesses increased their stockpiles of everything from raw materials to retail products for the 18th month in a row.

Growing inventories are usually a sign of business confidence. But in June Americans cut their spending for the first time in nearly two years.

“We are at a turning point,” said Bill Hampel, chief economist for the Credit Union National Association. “If the stock market continues to be volatile next week, I would expect a pretty serious effect on consumer confidence.”

Financial stocks continued to slide today. Investment bank Morgan Stanley fell 7% amid concerns about US banks’ exposure to the financial crisis in Europe and lawsuits related to poor-quality mortgage securities sold before the financial crisis of 2008. JPMorgan Chase & Co and Goldman Sachs Group also lost ground.