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Wall St bounces back

Published: 7:02AM Friday August 12, 2011 Source: Newstalk ZB/ONE News

US stocks rebounded strongly and European shares have rallied in a highly volatile trading session today.

Analyst Michael Milne, from Craigs Investment Partners, told TVNZ today that seeing the markets rebound was a relief.

"It was great to see some green this morning. Too often this week we've woken up and seen tomato sauce all over the screen, it's been red everywhere."

Milne says there was not a huge amount of news overnight for the markets to react to but they took some heart from IT company Cisco, which reported a strong result, and also better US jobless numbers.

"I guess it really shows the fickle nature of the market at the moment, a little bit of positive sentiment can spark a 350 point rally," he said on AMP Business.

Wall Street closed the session with its benchmark index, the Dow Jones industrial average, up 423.37 points, or 3.95%, to 11,143.31.

The Standard & Poor's 500 Index shot up 51.88 points, or 4.63%, to 1,172.64.

The Nasdaq Composite Index jumped 111.63 points, or 4.69%, to close at 2,492.68.

Today's rally marked the second bounce in a yo-yo week. After a sell-off that pushed the S&P 500 down as much as 17% since July 22, the market is showing some signs of regaining its footing. 

"It's a bungee cord market. We've fallen off of a small bridge, the bungee cord bounced us up, and oscillations will diminish, but we're stil bouncing around," said Fred Dickson, chief market strategist at D.A. Davidson & Co, in Lake Oswego, Oregon.

The CBOE Volatility Index, known as the VIX, shed 9.3%, though it remained near levels not seen in over a year.

The day's trading volume on the New York Stock Exchange, NYSE Amex and Nasdaq, was 12.99 billion - well above the year's estimated daily average of 7.8 billion.

"We're seeing a net flow of buy orders from retail investors here, so they're looking for bargains. I have not had anybody call me and say, 'Here's what I own. Tell me what I ought to sell,' and I've seen that in other high-volatility periods," Dickson said.

Other markets

Gold and the Swiss franc - which have soared as investors shied away from risk -- both fell. However, each had additional factors influencing their lack of appeal.
Gold faced its biggest daily loss in over a year on profit-taking and an increase in trading margins. Gold futures fell 2% to $1,748 an ounce.
The Swiss franc tumbled after the Swiss National Bank said it could ease monetary policy further.

Markets focused on the possibility of a temporary peg between the franc and the euro to rein in the soaring Swiss currency. 

The sanguine view in the equity market contrasted with nervousness in the short-term funding markets. 

The London interbank offered rate, LIBOR, on three-month dollars, the benchmark rate for $350 trillion worth of financial products worldwide, reached fresh four-month highs.