Sharp turns

Just how turbulent is the stock market? More than half a trillion dollars in paper gains were made and lost in just two weeks in September. The S&P 500 jumped 5 percent in the week ending Sept. 16, the second-best week this year. The next week it plunged 6 percent, the second-worst week this year.

On Oct. 4 the Dow Jones Industrial Average moved up more than 350 points-nearly 2 percent-in a single hour. The Dow Jones industrial average has gained or lost more than 200 points in a single trading day more than 20 times this year-the vast majority of them in the past two months. By comparison: Swings of 2 percent occurred just five times a year from 1950 to 1999.

The surge in volatility since early August is not just of interest to statisticians. Volatility is a sign of uncertainty. Among the effects of volatility: It prevents companies from going public and scares investors-both large and small-out of stocks and into what they perceive to be safer investments. It also tends to attract speculators, which creates yet more volatility.

But there are signs that volatility will diminish. After months of hard negotiation, action on the European debt crisis seems close (see "Debt resolution?" below), and the price of gold has seen a two-month slide after a massive five-year run-up. Analysts hope these developments will send both speculators and volatility to the sidelines.

Debt resolution?

A major reason for the global stock market volatility during the past two months has been uncertainty in Europe. Credit reporting agency Fitch downgraded the debt of both Italy and Spain in early October. That hurt bank stocks, as banks hold bonds from both countries. To counteract the bad news, the European Central Bank said it would provide unlimited one-year loans to banks through 2013, and that caused a short rally-until it said it wouldn't make the loans available until mid-November.

But this up-and-down may be nearing an end. German Chancellor Angela Merkel and French President Nicolas Sarkozy said a "comprehensive response" to the debt crisis would be finalized by the end of October, including a plan to make sure that banks have adequate capital. European Commission President José Manuel Barroso presented that plan on Oct. 12. It's seen as the strongest effort yet to address the region's debt crisis.

Also helping provide stability is news that Greece will likely receive the next batch of its bailout loans in early November. That was good news and bad news, since Greece needs the money now and even a few weeks of delay could cause unrest there. Adding to the bad news: Eurozone officials also said Greece's deficit targets for 2011 were "no longer within reach," and that while new austerity measures for 2012 were adequate, more were needed for 2013 and 2014.

Neutral numbers

The number of people applying for unemployment benefits for the first time has hovered around 400,000 a week for the past few months. That number is a sign that the job market remains weak.

First-time applications need to fall consistently below 375,000 per week to signal sustainable job growth. They haven't been below that level since February.

Ellen Zentner, senior economist at Nomura Securities, said applications around 400,000 indicate a neutral job market, "one that's neither picking up, nor deteriorating." But she's counting the news as a blessing since "even neutral readings" suggest the chances of another recession are abating.