Markets recover slightly Friday after week of turmoil

August 12, 2011

Stocks rose modestly on Friday after a pair of economic reports offered a muddled picture of how consumers are feeling about the economy.

The Commerce Department said that retail sales increased 0.5 percent to $390.4 billion in July, a sign that consumers are spending more and may have an increased sense of confidence in the economy. However, a separate report from Reuters and the University of Michigan showed that an index of consumer sentiment dropped from 63.7 in July to 54.9 in August, its lowest reading since 1980.

The Dow Jones industrial average, an index of 30 blue-chip stocks, increased 126 points, or 1.13 percent. The S&P 500, a broader measure of equities, climbed 6 points, or 0.53 percent, while the tech-heavy Nasdaq composite index was up 15.3 points, or 0.61 percent.

The Dow was down about 1.5 percent for the week, while the S&P was down 1.7 percent. The Nasdaq fared slightly better, with a 1 percent loss for the week.

“Investors are feeling a little better. Stocks were sold off to a point where they were very cheap, and they’re coming back in on the buy side,” said Fred Dickson, chief investment strategist of D.A. Davidson & Co.

Friday’s gains followed four chaotic days in which the markets swung more than 400 points in each trading session. The week began with a historic sell-off that wiped out $1.2 trillion in value from the U.S. stock market as investors digested the news that rating agency Standard & Poor’s had downgraded the country’s pristine credit rating for the first time in history. Stocks then staged a strong comeback Tuesday, with all indexes up at least 4 percent, only to tumble again Wednesday. They surged again on Thursday on the back of a better-than-expected weekly jobs report and strong corporate earnings.

None of the major indexes had seen such large daily swings since March 2009.

Jack Ablin, chief investment officer of Harris Private Bank in Chicago, said that discouraging economic signals in the U.S. were a factor in the market gyrations, but that “most of the concern is centered around Europe.”

“Investors just don’t like uncertainty,” he said. “Policymakers in Europe just have not provided solutions to these daunting problems.”

European stocks surged on Friday, with markets in Britain, Germany and France closing at least 3 percent higher after officials in France, Belgium, Italy and Spain enacted a temporary ban on short-sales of financial stocks.

Hong Kong’s Hang Seng index saw slight gains, finishing the day up 0.13 percent, while Japan’s Nikkei declined 0.2 percent.

Gold prices hit a record high on Wednesday of about $1,782 per ounce as investors sought safe buys amid turmoil in the markets.  By Friday afternoon, gold had settled to about $1,745 per ounce. 

Yields on 10-year Treasurys lingered around 2.25 percent Friday, down sharply from 2.55 percent last week.

Sarah Halzack is The Washington Post's national retail reporter. She has previously covered the local job market and the business of talent and hiring. She has also served as a Web producer for business and economic news.
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