The Dow Jones continued its wild ride yesterday. According to Wednesday’s New York Times, “after days of sudden losses and reversals in the market, investors rallied around a rare bit of good news. The Chinese Government dismissed reports that it might pare its European investments given the debt problems gripping Europe.”

On Wednesday, the Dow fell below 10,000 for the first time since February 8th. According to, “analysts said stocks seemed to react to a late-day dip in the euro below $1.22, possibly triggered by reports about China's commitment to European debt.” Wednesday’s Financial Times had said that China was “reviewing its euro-zone debt holdings in the wake of Europe's financial problems. China's State Administration of Foreign Exchange, which manages the reserves, has expressed concern about its exposure to the five euro-zone markets of Greece, Ireland, Italy, Portugal and Spain.” The increasing tension between North and South Korea has also added to the nervousness in the market.

However, yesterday saw a major rebound as the Dow Jones added 285 points, or 2.9%, to finish the day at 10,259. Quoting from CNN Money this morning, “U.S. stocks soared Thursday, with the major indexes gaining about 3%, after Chinese officials dismissed reports that they're reviewing their nation's investment in European bonds amid concerns about the continent's debt problems.”

What is confusing people is, according to the New York Times yesterday, “the wide swings without any particular conviction.” The article concluded that, “the market is now dominated by momentum trading.”

We should not expect this volatility to end any time soon. According to Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott, quoted in yesterday’s New York Times, “it is not even a day-to-day, it is kind of an hour to hour market.” We saw a nice “bounce” upwards yesterday, but this is symptomatic of the pattern we are seeing. Expect more of the same; the only relief could come as we get into summer and traders take vacation. This might be a steadying influence.
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