Finally some good news on the economic front-the unemployment rate went down from 9.2% to 9.1%.
The controls caused by the flash crash of May 2010 were in place yesterday during the wild trading day.
Here are the top financial stories of the day:
1) Stocks end a day of wild swings mostly down-From the AP
If you looked away Friday, you missed a market rally. Or a plunge.
A soothing government report on employment in July eased concerns that the U.S. might slide back into a recession, and the Dow Jones industrial average rose as much as 171 points soon after trading began. But fears that Europe's growing debt crisis might threaten U.S. banks and the fragile economy ruled Friday.
After its early rise, the Dow fell more than 400 points and was down 243 just before noon. Then it rose nearly 400 points in less than an hour and was up 135 points. The rest of the day, the blue-chip stock index bounced up and down, sometimes by as much as 100 points in less than half an hour. It ended the day up 61 points, or 0.5 percent.
Stocks have been "like a tether ball being smacked around the pole" by worries about weakening economies around the world, said Sam Stovall, chief investment strategist for Standard & Poor's Equity Research.
Even less-developed countries like Brazil and China, which have been the motor of global growth for three years, are slowing. Brazilian stocks have dropped nearly 30 percent since Nov. 4 as the country tries to stem inflation. Manufacturing in China shrank in July for the first time in a year.
In Europe, debt problems are spreading, threatening Italy and Spain, the continent's third-and fourth-largest economies. In the U.S, a possible debt default was averted earlier this week, but concerns remain. Chief among them: less spending by consumers, which is leading to anemic growth by both manufacturing and service companies and too few new jobs to lower the unemployment rate significantly.
Investors also worry that the federal government is more likely to hurt the economy than help it. Instead of more spending, the government is trying to reduce its budget deficits by spending less.
Randy Warren, chief investment officer at the investment company Warren Financial Service, said markets were jittery over how leaders in the U.S. reacted to the debt crisis here and how leaders in Europe have reacted to the growing debt problems there.
"The fear was that they had no plan to deal with the situation," Warren said.
In Europe, either Italy or Spain could become the next country unable to repay its debt. European leaders and central bankers might not have the cash needed to prop them up until a larger financial rescue fund can be established.
"The burden of debt has become much more onerous because the outlook for growth is sliding back. That is very concerning for the markets," said Don Smith, economist at ICAP, the largest inter-dealer broker in the world. "The fear is ultimately about defaults and business failures."
In the U.S., few believe the government is likely to stimulate the economy through spending, as it did with its $800 billion stimulus program in 2009. Washington will instead cut spending by more than $2.1 trillion over 10 years to reduce the deficit.
"When investors took a step back and looked at the deal, it became clear that the long-term debt issues have yet to be resolved and that some hard decisions still need to be made," said Bob Doll, chief equity strategist at BlackRock. "Investors do not like uncertainty."
That contributed significantly to the up and down trading on Friday and all week, strategists said. Some investors bought stocks after steep price declines, said Ron Florance, an investment strategist at Wells Fargo Private Bank. That helped reverse the midday loss. Others have rushed to sell their holdings before the weekend, he said. That contributed to the declines seen in the morning and the pared-back gains in the afternoon.
Such volatility often follows historic sell-offs like the one Thursday, analysts said.
All three major stock indexes are in correction. That is, they are down 10 percent or more off their recent highs.
The Dow fell 5.8 percent this week. It plunged 513 points on Thursday alone, the worst day for the Dow since 2008.
The S&P 500, the benchmark for most mutual funds, fell 0.1 percent Friday. It fell 7.2 percent for the week and is down 10.8 percent since July 22, when its steady declines began.
The Nasdaq composite index fell 24 points, or 0.9 percent. It is down 11.4 percent since July 22.
Commodities also fell on worries that weaker global economies will mean less demand. Crude oil fell $8.82, to $86.88 over the week.
Overseas markets also fell Friday. Tokyo, Hong Kong and China all closed down more than 2 percent. Taiwan lost 5.6 percent. Asian markets all closed before the jobs report was released in the U.S. In Europe, shares recovered some of their losses after plunging to their lowest levels in more than a year. Germany's DAX index fell 2.8 percent. It had been down as much as 4 percent before the jobs report was released in the U.S. Other indexes showed smaller losses.
The yield on the 2-year Treasury note fell to 0.29 percent, after brushing a record low of 0.26 percent earlier Friday. Investors looking for safer assets have rushed to buy Treasurys, sending their prices higher and yields lower. The yield on the benchmark 10-year Treasury note rose to 2.56 percent after hitting a low of 2.39 percent on Thursday.
Florance, of Wells Fargo, said he expected stocks to remain volatile for the next several weeks until it's clear how healthy -- or unhealthy -- the economy is.
The U.S. economy added 117,000 jobs in July, and 56,000 more were added in May and June than reported previously, the Labor Department said. The unemployment rate inched down to 9.1 percent from 9.2 percent, partly because some unemployed workers stopped looking for work, so they were no longer counted as unemployed. Health care providers and manufacturers added jobs.
"From an economic standpoint, 117,000 jobs is hardly sufficient to boost the economy," said Dan Greenhaus, chief global strategist at the trading firm BTIG.
But the number was what people who follow the markets were hoping for. The consensus forecast had been that the economy added 90,000 jobs in July. As the week wore on, investors began to worry the number would be smaller or even negative. After Thursday's market meltdown, the employment report, which was released before the market opened Friday, was considered reassuring.
More than 200,000 jobs need to be created every month to rapidly reduce the unemployment rate.
Unemployment has been above 9 percent nearly every month since the recession officially ended in June 2009. The economy has created an average of just 72,000 jobs over the last three months, down from 215,000 from February through April.
At the same time, the economy grew at just a 1.3 percent annual rate in the second quarter, less than economists expected. That weakness means one economic shock or policy mistake could tip the economy into a recession, Wachovia senior economist Mark Vitner said. Nigel Gault, chief U.S. economist for IHS
Global Insight, said the probability of another recession is 40 percent.
Even so, many analysts said the economy might not be as bad off as it seems. For one thing, companies have reported strong profits and are flush with cash. They also cut costs drastically during the recession.
Those in the S&P 500 have amassed more than $963 billion in cash. That's up from $610 billion at the start of the recession, according to S&P. Earnings in the second quarter rose 11 percent from a year ago for the 422 companies in the S&P 500 index that have reported so far.
Even so, only three of the S&P 500's ten industry groups are up for the year: Health care, utilities and consumer staples. Traders consider those companies to be relatively recession-resistant.
Procter & Gamble Co. rose 1.7 percent Friday. Fourth-quarter revenue and income jumped on strong sales in emerging markets.
Viacom Inc. rose 1.9 percent after the media company said its income and revenue increased more than analysts expected in the second quarter because of strong advertising sales and fees from cable companies.
Priceline.com Inc. surged 9.2 percent, the most in the S&P, after the company reported that it earned far more than analysts had expected in the second quarter as travel bookings on the website increased.
2) Payrolls Grow as Unemployment Ticks Down-From The Wall Street Journal
The U.S. economy added more jobs than expected in July and the unemployment rate edged down, a move that should help ease concerns that a new recession may be around the corner.
Nonfarm payrolls rose by 117,000 last month as private-sector employers added 154,000 jobs, the Labor Department said Friday. Payroll data for the previous two months were revised up by a total 56,000 to show increases of 46,000 jobs in June and 53,000 in May.
The unemployment rate, which is obtained from a separate household survey, dropped to 9.1% last month from 9.2% in June. That still leaves almost 14 million Americans who would like to work without a job.
The numbers were better than expected and may help lift stock markets, which fell sharply Thursday amid concerns that a new recession may be in the offing. Economists surveyed by Dow Jones Newswires had forecast payrolls would rise by 75,000 in July and that the jobless rate would remain at 9.2%.
The economy slowed sharply in the first half, heightening concerns it could fall back into recession two years after the end of the downturn that followed the financial crisis. The jobs report takes some pressure off the
Federal Reserve and President Barack Obama's administration to take immediate steps to boost the economy. Policy makers' tools are limited by an already high public debt and interest rates close to zero.
Friday's report showed private-sector employers, which account for about 70% of the work force, added 154,000 jobs in July, up from 80,000 in June. Several major industries showed job gains.
Manufacturing employment increased by 24,000 in July, more than double the gain from the previous month. Economists had been expecting a bounce as disruptions to production stemming from Japan's earthquake have been easing. Even the battered construction sector showed a gain, with employment rising by 8,000.
However, the housing sector remains a drag on the economy.
Meanwhile, government employment continued to fall—by 37,000—for the ninth month in a row. State and local governments, which are struggling to close budget gaps, showed job losses.
Even though the jobs report was better than expected, the labor market remains weak. Facing re-election in 15 months, Mr. Obama this week called on Congress to extend unemployment benefits and a payroll-tax credit after lawmakers approved a deal to raise the nation's debt limit. But he is likely to face stiff opposition from Republicans worried about government spending.
Even the Fed's options are limited. Donald Kohn, the Fed's no. 2 official until Sept. 2010, said in an interview this week that the central bank should consider a third round of bond purchases to spur the economy, but only if unemployment stays high and inflation comes down.
The jobs report Friday showed 44.4% of unemployed Americans, or 6.2 million people, were out of work for more than six months in July. The longer someone is without a job, the harder it is to find work.
The report showed that Americans' incomes, which are crucial to fuel spending needed to boost the economy, rose but remained moderate. Average hourly earnings of all employees rose by $0.10 to $23.13.
Over the past year, earnings have increased by only 2.3%.
3) 'Flash Crash' Fail-Safes Bent but Didn't Break in Selloff -From The Wall Street Journal
Wall Street's worst stock plunge in three years unfolded in a relatively orderly manner, as market safeguards put in place after last year's "flash crash" appeared to have done their job.
Despite significant glitches hitting European markets and a few minor headaches in the U.S., participants gave high marks to the complex electronic-trading network that suffered a meltdown in May 2010.
"The markets were very similar from a macroeconomic standpoint as they were on May 6 of last year, and obviously things performed much better," said Joseph Cangemi, managing director of electronic trading for Convergex Inc. "We could have had a situation at any one time where capitulation could have happened, but the market structure itself did not allow it to breach any critical levels."
Trading on Thursday was the U.S. stock market's busiest day since late May 2010, with 13.9 billion shares changing hands as investors fled from stocks. An average day this year has seen 7.5 billion shares traded, holding well below the prior-year average of 8.5 billion.
Grappling with an unusually heavy flow of orders caused some exchanges and private trading platforms to occasionally reject orders when their systems became overloaded, but it was "nothing crazy," according to the head of electronic stock trading for one Wall Street bank.
Problems in Europe were more severe, where derivatives markets run by NYSE Euronext reported a 90-minute trading engine outage that forced a delayed open for interest-rate and stock-index contracts, while driving erroneous calculations of equity indexes compiled by the exchange group.
Milan-based Borsa Italiana also told traders of problems disseminating stock index data, caused by slow feeds.
During the freefall in share valuations that erased all 2011 gains for the Dow Jones Industrial Average, new "circuit breakers" introduced after the 2010 flash crash to guard specific stocks against rapid price swings were triggered by just one stock: Clearwire Corp., which reported steeper losses for the second quarter as expenses jumped. The Dow closed about 4.3% lower and remained well within market-wide circuit-breaker levels that would have triggered a shutdown of all U.S. stock trading.
Another new safeguard formulated following the flash crash—rules identifying trades entered in obvious error—was invoked when Vodafone's stock more than doubled in price to $57.50 before returning to trade at $27.57. NYSE Amex ultimately canceled all trades carried out above $28.89.
Meanwhile, roughly 460 short-sale restrictions were invoked, well above average. The procedure is triggered when a stock's price falls at least 10% in a single day. In such cases, traders are only allowed to sell the stock short at a price above the highest national bid, serving to relieve what is often sharp, rapid selling pressure.
At U.S. stock exchanges, the action was viewed as a vindication of market procedures.
"Investors are anxious about the U.S. and global economic outlook, and the current market volatility reflects their distress," said Larry Leibowitz, chief operating officer of NYSE Euronext. "While high volume has accompanied this volatility, we have not seen a real panic," he added, asserting that exchanges' performance has been "high" through a "difficult time."
Quote of the Day from Dave Ramsey.com:
There is a great difference between worry and concern. A worried person sees a problem, and a concerned person solves a problem. — Harold Stephens
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