Dow regains most of losses in 7 trading days

11Jul11

Remember the Dow Jones industrial average’s scary drop of nearly 1,000 points in spring? The one that lasted six long weeks, knocked the Dow down 7.1% and pretty much had everyone on Wall Street thinking the bull market that began in March 2009 was going to fall victim to a double-dip recession at home and a debt-bomb explosion in Europe?

Well, nearly all of those losses have been wiped out in a bullish streak in which the Dow has risen in seven of the past eight sessions. In that short span, talk of a possible correction, or a drop of 10% or more, has given way to the prospect of stocks hitting both a fresh 2011 high and new bull market peak.

“Markets certainly have delivered a ‘Christmas in July,'” said Christopher Mistal of the Stock Trader’s Almanac in an alert after the market close Thursday in which the Dow rose nearly 94 points to 12,719.49, leaving it less than 100 points shy of its April 29 high of 12,810.54.

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What turned the tide?

Mistal points to the temporary resolution to Greece’s debt mess, hopes for a timely deal to raise the U.S. federal debt limit to avoid a default, and some better economic data and hopes for another strong corporate profit reporting season, which kicks off Monday.

Recent upbeat signals include:

•Jobs improvement. ADP said Thursday that 157,000 private-sector jobs were created last month, more than double the amount economists’ expected. And the government reported that first-time jobless claims fell more than expected last week. That raised hopes that today’s June employment report will come in stronger than the roughly 100,000 new jobs analysts expect, says Paul Hickey of Bespoke Investment Group.

•Deficit talks.President Obama said Thursday that talks with Republicans to trim the swelling budget deficit and increase the debt ceiling by the Aug. 2 deadline were “constructive.” That raised hopes on Wall Street that a deal will get done.

Investors are also betting that second-quarter corporate profits will come in better than the 10% growth analysts expect, despite more profit warnings from companies than the previous quarter.

By Adam Shell, USA Today, July 9, 2011

Learn more about Ron Sloy.

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