U.S. markets returned to their normal volatile behavior this week, as opposed to the radical tailspin on last Thursday that lasted all of 15 minutes.
Securities and Exchange Commission Chairman Mary Schapiro said in congressional testimony: “We are unable to point to a single event that could be the sole cause” of the erratic free fall that dropped the Dow Jones industrial average nearly 1,000 points before a partial recovery that was almost as quick as the fall itself.
While analyzing millions of trades, the SEC has all but ruled out malevolent market sabotage or a misplaced decimal point typed in by a trader — the so called “fat finger” theory.
The SEC said directors of six major exchanges had submitted a plan to revamp the firewalls that are already set up to slow down trading in the event of a catastrophic plunge. That plan would be unveiled next week, The Washington Post reported Wednesday.
Investors now have a post-rescue plan market to consider, one in which a nearly $1 trillion plan to thwart a currency free fall in Europe is in effect.
Markets this week have already stuttered through their traditional two-step reaction to major news, which includes a swift adjustment in the name of euphoria followed by a sobering correction the following day. When the smoke cleared following Monday’s strong rebound, investors took notice that inflation in China would likely yield to tighter monetary policies, putting in check expectations at Caterpillar Inc. and others who count on China’s ability to spend.
Investors will see U.S. trade balance figures for March on Wednesday, where the trade gap is expected to rise slightly to $39.8 billion from February’s $39.7 billion.
Economist Peter Morici at the Robert H. Smith School of Business University of Maryland points out the trade gap with China alone “is reducing U.S. gross domestic product by more than $400 billion or nearly 3 percent.” As the chaos in Europe settles, the chaos of imbalance is visible again.
In Washington, Senators approved an amendment to the financial reform bill Tuesday that would subject the Federal Reserve to a one-time audit to shed light on the deal-making that occurred during the financial meltdown in 2008 and 2009.
That’s a book or three right there. Maybe Sen. Bernard Sanders, Ind-Vt., will write one. Sanders, who has been bucking for a Fed audit for years, has spelled out an audit that is designed to asses the Fed from a variety of angles from “operational integrity, accounting, financial reporting and internal controls,” to whether it played favorites in financial assistance packages.
In international markets Wednesday, the Nikkei 225 index in Japan lost 0.16 percent, while the Shanghai composite index added 0.31 percent. The Hang Seng index in Hong Kong rose 0.33 percent, while the Sensex in India added 0.32 percent.
In Australia, the S&P/ASX 200 rose 0.55 percent.
In midday trading in Europe, the FTSE 100 index in Britain rose 0.24 percent, while the DAX 30 in Germany added 1.83 percent. The CAC 40 in France added 0.81 percent, while the pan-European DJ Stoxx 50 rose 0.68 percent.
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