The week long roller coaster stock market continued today but this time it was all positive.
As of now the first time unemployment claims came in today at 395,000. However, this figure has been adjusted up the last few weeks so don't go to the bank with this number.
Any wonder for these wild swings in stocks the last few days-did anyone say day traders?
Here are the top financial stories of the day:
1) Dow soars 423 points on economic news-From The Wall Street Journal
U.S. blue-chip stocks notched a strong advance Thursday, as investors seized on favorable corporate and economic reports to recover most of the ground they lost in the previous session.
The blue-chip Dow Jones Industrial Average soared 423.37 points, or 3.95%, to 11143.31. It was the fourth straight move of 400 points or greater, a first in the Dow's history. The action followed Wednesday's 520-point slump, the ninth-largest point drop ever, amid mounting worries about the health of Europe's banks and the chances of a global economic recession.
The Standard & Poor's 500-stock index jumped 51.88 points, or 4.63%, to 1172.64, led by battered financial stocks. The Nasdaq Composite surged 111.63 points, or 4.69%, to 2492.68.
Thursday's two big catalysts were a rare favorable weekly employment report and signs of a turnaround at networking-equipment maker Cisco Systems. The absence of troublesome new developments in European sovereign debt and banking also helped. Markets have swung violently this week and last as investors weighed the chances of a global economic recession and fretted over further debt turmoil on two continents.
While the huge swing to the upside relieved some investors, to others it was more a symptom of the extreme volatility that has gripped markets of late.
"It's great to have these up days, but I think that we are going to continue to be in a choppy period with these big swings," said Margaret Patel, senior portfolio manager at Wells Capital Management. "The reason we had our meltdown was really over in Europe. It made the markets look like one of the dark days in 2008, melting away with no rhyme or reason."
Cisco Systems was the strongest blue-chip stock, surging 16% after its late Wednesday earnings report. Chief Executive John Chambers said the company was making "solid progress" on its turnaround effort. Bank of America, which slumped 11% Wednesday, was the second strongest, rising 7.1%.
The number of people claiming new jobless benefits fell last week to the lowest level in four months, dropping to a seasonally adjusted 395,000 in the week ended Aug. 6., a small bright spot in a persistently weak U.S. labor market that boosted investor sentiment Thursday
2) Applications for jobless benefits decline-From MarketWatch
The number of people who applied for unemployment benefits fell below 400,000 last week for the first time since early April, as jobless claims continued on a slow downward trajectory.
Initial claims dropped by 7,000 to a seasonally adjusted 395,000, the Labor Department said Thursday. Initial claims from two weeks ago were revised to 402,000, up from 400,000 originally.
Economists surveyed by MarketWatch had expected new applications to rise to 410,000 in the week ended Aug. 6.
The average of new claims over the last four weeks, viewed as a more accurate gauge of employment trends, fell by 3,250 to 405,000, the lowest level since mid-April.
While the level of claims is still elevated, applications for jobless benefits have subsided since hitting a recent peak of 478,000 at the end of April. In good economic times, claims tend to drop well below 400,000 when the pace of hiring soars and companies rapidly expand their workforces.
Like last week’s monthly employment report for July, the latest claims figures suggest the labor market isn’t quite as poor as feared after a slew of other data pointed to a sharp economic slowdown. In July the U.S. added 117,000 jobs to nonfarm payrolls.
Still, the economy remains weak, and hiring by historical standards is very slow at the current stage of recovery. The U.S. needs to add at least 125,000 jobs a month just to keep up with the growth of the labor force — and double that amount to drive down the nation’s unemployment rate, which stood at 9.1% for July.
The chance that hiring will sharply accelerate in the near future, however, appears low. Slower consumer spending, plunging stock markets and worries about excessive debt in the U.S. and Europe have spurred many companies to reevaluate hiring plans.
On Tuesday, the Federal Reserve added to the gloom with an updated forecast suggesting the U.S. could remain weak through 2013. The central bank offered little hope that the nation’s jobless rate would fall quickly and put millions of jobless Americans back to work.
The latest claims report, however, appeared to temporarily ease the concerns of investors. U.S. stock markets rose in early Thursday action.
3) Big ups and downs give daytraders a way to thrive-From Reuters
These days, every day in the market is an adventure. But some daytraders are making a killing, taking advantage of wild market swings that have scared off even strong-stomached investors.
The Dow industrials have traded in a range of 400 points every day in the last five days, while the CBOE Volatility index (Chicago Options:^VIX - News) has more than doubled from a recent closing low on July 22.
Fear has increased alongside signs of slowing growth and an unprecedented downgrade of the U.S. credit rating by Standard & Poor's. But swings have gone both ways: the S&P recently posted not only its worst day since 2008, but also its best.
"I trade the way the market tells me. And if you're like that, this is one of the best markets you'll ever have," said Joe Donohue, money manager at Dimension Trading in Red Bank, New Jersey, a proprietary trading services firm.
Donohue said his focus is more short-term to play this market. A few weeks ago he held positions for two or three days, but now he closes out positions at the end of a session.
"If you need to play, be squared out at the close," he said. "Don't carry much exposure overnight because you could be long and then have a 400-point drop at the open ... We're in such a risky market that anything could come out of Europe or Asia to change things completely."
Daytraders take a short-term outlook on the market, holding positions for less than a day. They often sell securities short to profit from both upward and downward movements, bringing the chance of big wins, or equally large losses.
Donohue said he primarily traded in the Direxion Daily Small Cap Bull 3X Shares ETF (Pacific:TNA - News), which seeks returns of 300 percent of the daily performance of the Russell 2000, and the Direxion Daily Small Cap Bear 3X Shares ETF (Pacific:TZA - News), which is trice-short the Russell, tapping into market volatility.
On Tuesday afternoon, markets swung madly as investors parsed comments from the U.S. Federal Reserve pledging two more years of near-zero interest rates. Indexes reversed course six times before ending more than 4 percent higher.
"After the market dipped, I sensed there would be a move to the upside so I went long," Donohue said. In Wednesday's similarly volatile session, "I was long in the morning then went to TZA late in the day."
BELLE OF THE BALL
Donohue isn't the only trader embracing favorite names to avoid the fluctuations of the broader market.
"Right now the belle of the ball is the FactorShares 2X: Gold Bull/S&P500 Bear ETF (Pacific:FSG - News)," said Joshua Brown, vice president of investments at Fusion Analytics in New York, referring to a fund that is double-short S&P futures and double-long gold prices.
Volume on the fund has surged in recent sessions, with the 10-day moving average more than triple the 50-day average.
It "was built for this moment," Brown said of the fund, which is up 76 percent from its July 1 recent closing low. "The chart looks like the Empire State Building."
Of course, the velocity of the changes in market direction means traders who are not nimble can get caught on the wrong side of a trade, exposing themselves to massive losses.
The FactorShares fund "is a momentum heavy story," Brown said. "if you're not quick on it, it's the kind of instrument that can wipe you out."
With sudden moves between gains and losses an ever-present concern, traders do what they can to find an edge.
SEIZE THE MOMENT
Chicago-based Bright Trading trains its traders to manipulate mechanics like the opening gap, where they take advantage of price gaps in the initial trading of the stock.
"The other day General Electric Co (NYSE:GE - News) opened and moved up 40 cents within 60 seconds," said Donald Bright, one of the firm's directors.
"Traders made thousands of dollars on it right then, and when you see openings where the market moves 300 points, the returns are even bigger... Lately we've had the best days on (opening gap plays) that we've had in maybe a year."
Toward the close, the firm looks to take advantage of order imbalances, which are published 15 minutes before the market session ends and suggest which side of a trade will have greater demand.
Knowing the imbalance gives an edge that "works a lot of the time," Bright said. "Experienced traders at our firm dream of days like this," he added. "They make more in a week than they do in a month, normally."
But the recent price action can be too much of a good thing, even for traders who thrive on fast swings.
"I love volatility, But I don't think we wanted to get to this level of volatility every day," said Tony Battista, who co-anchors Chicago-based Tasty Trade's how-to show on trading techniques and was a market maker for 25 years.
"You don't like for the market to have this type of percentage move in a day," he added. "That's something nobody wants to see, even volatility buyers."
Battista's solution to trading losses was simple -- do something to change his luck. "I changed my pen this morning," he joked. "I had a $2 pen. I went to a 15-cent pen. It's back to basics now."
Quote of the Day from Dave Ramsey.com:
I can accept failure, everyone fails at something. But I can't accept not trying. — Michael Jordan
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