Stock markets jump wildly amid investor confusion

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Stock markets bounced around dramatically on Friday morning as investors wavered over the meaning of the latest signals on the global economy.

The Dow Jones industrial average dropped as much as 200 points in early trading before jumping sharply into positive territory after a news report suggested that the European Central Bank may take steps to help shore up the debt crisis in Italy and Spain.

The Dow was recently trading up 122.65 points, or 1.1%, at 11,506.33, just a day after the blue-chip average lost a staggering 512 points.

Before the markets opened, the U.S. government announced that the economy had added a better than expected 117,000 jobs in July, enough to bring the unemployment rate down one tick to 9.1%. That gave brief encouragement to traders as the markets opened with the Dow rising nearly 150 points, but pessimism soon set in, dragging the markets down, before the more recent rebound.

Overnight, stock markets in Asia followed U.S. markets down close to 4%.

The markets reflect the wide disagreement among investors about the meaning of the decline in stock indexes over the last two weeks.

A growing number of economists have said the United States could be headed back into recession, pointing to the recent drop in consumer spending and the continuing drag of debt on the U.S. and European economies.

The yield on the U.S. Treasury bond was up slightly Friday morning as fears returned that the Standard & Poor’s rating agency may drop the U.S. down from its triple-A rating.

Another camp has said the downturn is likely to be temporary, encouraging ordinary investors to hold onto stocks. The speculation about the European Central Bank’s plans to help Italy and Spain gave hope that the markets there may recover.

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-- Nathaniel Popper