Stocks climb a day after biggest drop in a year

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Stocks climb a day after biggest drop in a year

By TIM PARADIS, AP Business Writer Tim Paradis, Ap Business Writer – 21 mins ago

NEW YORK – Stocks turned higher a day after posting their biggest drops in more

than a year.

Trading has been volatile Friday and there are still worries about Europe is

handling its debt crisis. Analysts said a bounce back after the slide Thursday

wasn't surprising.

The Dow industrial average rose about 115 points in midday trading after

falling below 10,000 in morning trading.

The volatility comes after major indexes entered " correction " mode, having

dropped more than 10 percent from their 2010 highs set last month.

Investors again looked to Europe for direction. The German parliament approved

the country's share of a $1 trillion plan to help contain debt problems in the

European Union. Major stock indexes in Europe were mixed but pulled well off

their lows. Traders have been worried that stronger countries like Germany and

France will be saddled with heavy debts to help weaker EU countries.

The euro rose to $1.2543 from $1.2464. The 16-nation currency has been a big

driver of trading for weeks but many traders have been skeptical that any

advances will be short-lived.

World markets have been falling on concerns that European debt problems will

slow or maybe even stop a global rebound. The fear is that huge deficits in

countries including Greece and Portugal will cause a wave of bad debt to race

through the world's financial system. Even if that is prevented, the prospect of

heavier borrowing and sluggish growth has traders concerned.

It's impossible to know whether the market is in for more than a correction but

analysts say that the fear hasn't turned to panic like it did during the

market's slide in late 2008 and early 2009.

" The likelihood of a double dip here is, I think, being really exaggerated, "

said Stu Schweitzer, global markets strategist at J.P. 's Private Bank in

New York, referring to the prospect of another recession.

Schweitzer also expects the market will stabilize.

" It's a very tough call to make, but I come down on the side that it's more

likely to be a correction, " he said.

In midday trading, the Dow rose 105.95, or 1.1 percent, to 10,174.42. The

broader Standard & Poor's 500 index rose 15.61, or 1.5 percent, to 1,087.20. The

Nasdaq composite index rose 33.55, or 1.5 percent, to 2,237.56.

The Dow had last fallen below 10,000 on May 6 when it lost nearly 1,000 points

in an afternoon rout that was the biggest ever intraday slide. Regulators have

said they are still unclear on what caused the brief drop.

The Dow tumbled 376 points Thursday. The Dow and the S & P 500 index fell more

than 3 percent, while the Nasdaq lost 4.1 percent. The drop has erased the gains

major indexes had made in 2010.

Bond prices slipped after surging Thursday when investors dumped anything seen

as risky, including stocks and commodities. The yield on the benchmark 10-year

Treasury note, which moves opposite its price, rose to 3.23 percent from 3.22

percent late Thursday.

Crude oil dropped 96 cents to $69.84 per barrel on the New York Mercantile

Exchange.

The Chicago Board Options Exchange's Volatility Index fell 14.5 percent. The

VIX, which is known as the market's fear gauge, closed Thursday at its highest

level since March 2009. The jump signaled that traders were bracing for more

drops in the market.

Even with the drop of 12 percent from its 2010 high, the S & P 500 index is still

up 58 percent from the March 2009 bottom and is down 31.5 percent from its

record close of 1,565 in October 2007.

Corrections can be scary but they can be good for markets. Analysts say major

stock indexes had become overheated in their climb from a 12-year low in March

2009. Corrections also aren't unusual. Drops of 10 percent occur in most years

and don't necessarily that stocks will keep sliding.

" We don't think there is any predictability that just because we've had a 10

percent correction now that suddenly we're in for another 10 percent drop, " said

Bill Urban, principal with Bingham, Osborn & Scarborough, based in San

Francisco.

Financial stocks also drew attention. The Senate late Thursday approved its

version of a financial overhaul bill that contains the biggest regulatory

changes for banks since the 1930s. The bill will now be reconciled with a

version that passed the House.

Goldman Sachs Group Inc. rose $6.65, or 4.9 percent, to $142.75, while Wells

Fargo & Co. rose $1.31, or 4.6 percent, to $30.

The Treasury Department said after the slide in world markets Thursday that

Treasury Secretary Geithner would head to Europe next week to meet with

finance officials in Britain and Germany on how to boost confidence in the

financial system.

Britain's FTSE 100 fell 0.9 percent and briefly dropped below the psychological

threshold of 5,000. Germany's DAX index slid 1.6 percent, and France's CAC-40

fell 0.7 percent. Earlier, Japan's Nikkei stock average fell 2.5 percent.

In corporate news, Dell Inc. reported after the closing bell Thursday that its

first-quarter net income increased but the company's gross profit margin fell

from a year earlier. The stock fell 81 cents, or 5.7 percent, to $13.51.

Gap Inc. reported a 40 percent increase in first-quarter net income. The company

boosted its profit forecast for the year but the outlook fell short of analysts'

forecasts. Gap rose 61 cents, or 2.8 percent, to $21.76.