U.S. blue-chip stock indexes on Tuesday posted their biggest gains of the new year, as the market continued to bounce back after a four-week slump.

The Dow Jones industrial average rallied 169.67 points, or 1.7%, to 10,268.81, its largest percentage advance since Nov. 9.

The broader Standard & Poor’s 500 index also had its best day since Nov. 9, rising 1.8% to 1,094.87.

Although trading volume was light as some investors and traders added a fourth day to their three-day holiday, market players who came back to work had more reasons to buy than sell: some solid data on U.S. manufacturing and on housing, and a rebound in the euro as worries about Greece’s debt nightmare receded a bit.

The weakness in the dollar in turn helped boost commodity prices (gold jumped $29.80 to $1,119.30 an ounce, the highest since Jan. 19), and that was good for stocks of energy and raw-materials producers, which led the S&P index higher.

Wall Street had slumped for four straight weeks through Feb. 5, the longest losing streak since mid-2009, and the market seemed poised to suffer its first 10% drop in major indexes since the rally began last March. The New York Stock Exchange composite index fell 9.9% from Jan. 11 to Feb. 8, and some market sectors suffered bigger hits (see this list of the declines in popular exchange-traded funds as of Feb. 8).

But the bears couldn’t keep the selling momentum going. The NYSE index now has rallied 4.5% since Feb. 8. And the riskier corners of the market are leading the rebound. The Russell 2,000 small-stock index is up 5.8% since Feb. 8; the Ishares Emerging Markets index stock fund is up 7% since then.

-- Tom Petruno

Crisis over, or just on hold?

Yields on Greek, Portuguese and Spanish government bonds tumbled Wednesday for a second straight session, as investors and traders bet that richer European governments would come through with an aid package to back up the finances of their poorer neighbors.

The yield on 2-year Greek government notes dived to 5.52% from 6.31% on Tuesday and 6.63% on Monday. And European stock markets were mostly higher for a third day after last week’s plunge.

But the latest news reports from Europe suggest government authorities still aren’t sure what to do about their debt crisis, or how soon.

The Wall Street Journal reports that euro-zone finance ministers held a conference call Wednesday and that “a senior Spanish official said participants discussed mechanisms that could be used to guarantee Greek debt.”

Reuters reports that “Euro area finance officials said bilateral aid by individual European Union members, chiefly Germany and France, or guarantees for Greek debt issues appeared the most likely solution, but cautioned that no decision on the form of assistance was imminent.”

European Union leaders are scheduled to meet Thursday, but it isn’t clear that they’ll be ready to announce something. Whether they do or don't, it could make for another wild day in global markets.

If an aid package is announced, “Markets could try to test such a commitment,” Carsten Brzeski, an economist at ING Group in Brussels, told Bloomberg News. “Markets would probably be enthusiastic at first glance, but at second glance there might be people trying to check how strong this commitment was.”

Greece’s soaring budget deficit has raised fears that the government might default on its debt. Those worries drove up interest rates on Greek bonds in recent weeks and began to infect other countries struggling with ballooning deficits, including Portugal and Spain. The concerns also hammered the euro currency, which fell on Monday to a nine-month low. On Wednesday the euro slipped again.

On Tuesday, European leaders were promising to come up with some kind of plan to calm the markets. An EU-backed debt guarantee program appeared to be the favored step: In effect, Germany and other wealthy nations would be standing behind the debt of weaker countries.

In one encouraging sign, investors were willing to buy $4.1 billion of 10-year notes from Portugal on Wednesday, though the government had to pay a yield of 4.82% on the notes, well above the 4.55% market yield on previously issued 10-year notes.

By contrast, the U.S. Treasury paid a yield of 3.69% on $25 billion of 10-year notes sold Wednesday.

-- Tom Petruno

Photo: Striking Greek government workers in Athens protest the government's austerity plan to slash its budget deficit. Credit: Simela Pantzartzi / EPA

Vague promises of European support for Greece sparked a big turnaround in battered financial markets Tuesday.

The Dow Jones industrial average was up 190 points, or 1.9%, to 10,097 at about 10 a.m. PST. The blue-chip index on Monday had fallen 104 points to a three-month low of 9,908, in part on fears that European government-debt woes would fuel another global financial crisis.

[UPDATE at 1:15 p.m.: The Dow closed up 150.25 points, or 1.5%, to 10,058.64.]

The euro currency, beaten down in recent weeks, has soared to $1.379 from $1.365 on Monday.

The action in stocks and the euro looked like a “short squeeze,” meaning that traders who had bet on continuing declines in those markets were buying to close out their positions.

Olli Rehn, the new European economic affairs commissioner for the European Commission, said the group was “talking about support in the broad sense of the word” for Greece. “I cannot specify it now,” Bloomberg News reported.

“Solidarity goes both ways,’’ Rehn said. “I am sure that in the next couple of days we will see discussion and decisions to this effect.”

Reuters reported that a senior German government official said that “a decision on help for Greece has been taken in principle within the euro zone.”  The aid may be in the form of European Union-backed loan guarantees, the Wall Street Journal reported.

Expectations for a rescue package also were stoked after European Central Bank President Jean-Claude Trichet was said to have cut short a trip to Australia to attend a special European Union meeting in Brussels on Thursday.

There has been speculation in recent days that other European states would help Greece as it struggles to pare its soaring budget deficit. Assistance from the rest of Europe could calm bond investors, who in recent weeks have demanded ever-higher yields on Greek debt to compensate for fears of default.

Greece’s finances alone wouldn’t be a huge concern for Europe, but its troubles have spilled into other  markets, raising the risk of financial “contagion.” Investors have sharply pushed up yields on Portuguese and Spanish government bonds as well in recent weeks, making it more expensive for those nations to borrow.

But yields fell sharply in Greece, Portugal and Spain on Tuesday. The yield on 2-year Greek government notes slid to 6.34% from 6.63% on Monday. Spanish two-year note yields fell to 1.95% from 2.16%.

-- Tom Petruno

Photo: Olli Rehn, European economic affairs commissioner. Credit: Olivier Hoslet / EPA

The U.S. stock market is nearing “correction” territory, meaning a decline of more than 10% in key indexes from their recent highs. That would be the first pullback of that magnitude since the market’s big rebound  began last March.

The 10% mark, being a nice round number, may cause investors to ponder whether to join the selling, sit tight or buy more.

The average New York Stock Exchange stock, as measured by the NYSE composite index, was down 9.9% through Monday, measured from its recent closing high on Jan. 11 through Monday.

The last significant drop in the NYSE composite occurred from early-June to mid-July. That decline shaved 9% off the index before the bulls regained control of the market.

This time around, amid fresh doubts about the global economic recovery, some investments already have declined more than 10% from their recent highs. The accompanying chart of popular exchange-traded funds shows the damage thus far.

The iShares Silver Trust, which tracks the price of silver, has dropped 21.9% from its 52-week reached Dec. 2. The surge in the dollar since late November has undermined commodities in general.

Measured in dollars, foreign stock markets generally are down more from their highs than U.S. blue-chip indexes. That reflects selling overseas as well as the effect of the rising dollar (as foreign currencies lose value against the greenback, investments denominated in those currencies translate into fewer dollars).

The iShares MSCI Brazil stock index fund is down 21.2% from its recent high on Dec. 2. The Vanguard FTSE All-World Ex-U.S. stock index fund, which invests in developed and emerging markets except the U.S., is off 13% from its high on Jan. 14.

Corporate bonds also have lost value in recent weeks, but they’re holding up much better than stocks, which is what you’d hope to see if you're relying on bonds to provide a portfolio cushion. The iShares Investment-Grade Corporate Bond index fund is down just 2.5% from its recent high reached Nov. 30.

-- Tom Petruno

In times of crisis, sell your gold?

It may not make sense to the huge crowd of investors worldwide who have plowed cash into precious metals in recent years, but gold was dumped with most other assets in Thursday’s global sell-off.

Near-term gold futures plunged $49, or 4.4%, to $1,062.40 an ounce in New York, the biggest one-day decline since Dec. 1, 2008. The metal is at its lowest price since Nov. 2 and down 12.7% from the record high of $1,217.40 set on Dec. 3.

Silver and platinum also tumbled, as did oil, copper and most other raw materials in the Reuters/Jefferies CRB index of 19 commodities.

Now, here’s what will annoy gold investors: Many of them bought the metal as a hedge against another crisis in financial markets -- and specifically as a hedge against paper currencies. Given the massive debts that governments worldwide have racked up as they’ve borrowed and spent to shore up their battered economies, gold bulls can make a strong case that paper currencies should be losing purchasing power.

And that’s exactly what happened Thursday with the euro, the British pound, the Mexican peso and many others, as investors fled those currencies. One trigger was another jump in yields on government bonds of Portugal and Spain, as markets began to bet that those deficit-ridden countries would repeat the budget crisis that has hammered Greece since late November.

But rather than reject all paper currencies, some investors and traders continue to place their faith in the world’s reserve currency: the U.S. dollar. The DXY index of the dollar’s value against a basket of six other key currencies rose 0.8% to 79.93, its highest level since early July.

And when the dollar rallies, its archrival -- gold -- usually falls. That's what happened during the credit-crisis-induced market meltdown of late 2008 as well.

There’s also a simple momentum effect at work here: Commodity traders aren’t thinking about where gold might be in six or nine months if government budget crises spread like wildfire. They’re just thinking about where gold might be a day from now. When the short-term price trend changes in a commodity, in either direction, it encourages a pile-on by momentum players.

“From a trader’s standpoint, we don’t care about the fundamentals in the heat of the battle,” said Larry Young, a senior trader at Infinity Futures in Chicago. “We’re just following the money.”

George Kopp, senior market strategist at LaSalle Futures Group in Chicago, thinks the selling momentum in silver could carry it down to a range of $13 to $13.50 an ounce within 75 days. Near-term silver futures plummeted 97 cents, or 5.9%, to $15.34 an ounce on Thursday. The price had reached $19.33 on Dec. 2.

If he’s right about silver, Kopp said, gold could drop to around $900.

And keep in mind, commodity analysts note, that if Europe were to lead the global economy back into recession, industrial demand for all metals would ebb, putting further downward pressure on prices.

Kopp offers one bit of anecdotal evidence that gold bulls have gotten overconfident: In recent conversations with clients and others, he said, “I’ve never talked to so many people who are holding physical gold and silver.”

But when he suggests that they might want to protect themselves against a plunge in prices by using futures or other instruments to hedge, “Not one person wants to do it,” Kopp said.

-- Tom Petruno

Photo credit: Frantzesco Kangaris / Bloomberg News

The Dow Jones industrial average is closing in on 10,000 -- from the wrong direction.

Stock markets around the world plunged Thursday on concern over the mounting debt problems of several European governments as well as an unexpected rise in U.S. jobless claims.

The Dow tumbled more than 250 points -- coming within three points of closing below the 10,000 mark that it retook in October during its long climb back from the financial crisis.

In the final minutes of trading, the blue-chip gauge was briefly below 10,000, falling as low as 9,998.71. It ended the day down 268.37 points, or 2.6%, to 10,002.18 -- its lowest close since Nov. 4.

Investors were spooked in part by a Labor Department report showing that claims for first-time jobless benefits rose to 480,000 last week, exceeding the 455,000 that economists expected. The number seemed to dash hope that the January unemployment report to be released Friday would point to an improving job picture.

Major European markets plunged more than 2%, with shares in Spain sinking nearly 6%, as investors worried that the growing budget woes that have hammered Greece were spreading to Spain, Portugal and other nations.

“The reality is that countries with budgets that are out of control or seriously compromised need to do much more efforts to fix their budgets, which means taking actions that will exacerbate the recessions going on all around Europe,” said Adolfo Laurenti, an economist at Mesirow Financial in Chicago.

Prices of oil, gold and other commodities also slumped as investors fled to what they perceived to be safer havens, including the dollar and Treasury securities.

The Dow is off 6.7% since hitting its recent peak of 10,725 on Jan. 19.

The broader Standard & Poor’s 500 sank 3.1% Thursday and the Nasdaq composite index lost 3%.

-- Walter Hamilton

Photo: At the New York Stock Exchange on Thursday. Credit: Justin Lane / EPA

Global investors’ fears about a potential full-blown government debt crisis in Europe fueled a massive rush for safety on Thursday, driving stocks, commodities and other assets sharply lower.

European stock markets ended the day off at least 2%, and some fared far worse: The Spanish stock market plummeted nearly 6%, Portugal's market dived 5% and Italy’s sank 3.5%.

On Wall Street, the Dow Jones industrial average was down 213 points, or 2.1%, to 10,057 at about 10:25 a.m. PST, hurt by Europe’s plunge and by a surprising rise in new claims for unemployment benefits. The claims data are spooking market bulls ahead of Friday’s government report on January employment.

Many investors and traders also are fleeing commodities for the perceived safety of the dollar and U.S. Treasury bonds. Gold was down $47, or 4.2%, to $1,065 an ounce in New York.

The mess in Europe began in Greece in late November, as the country’s mounting budget deficit -- a result of surging government spending to shore up the economy -- spooked investors. They demanded ever-rising yields on Greek bonds to compensate for what they viewed as rising risk.

As with the subprime mortgage crisis in the U.S. two years ago, Greece’s woes have proved contagious -- in this case, for some other European governments running large deficits.

Portugal could be the next domino to fall. The yield on five-year Portuguese government bonds rose to 3.95% on Thursday, up from 3.32% just two weeks ago. Government bond yields also have risen sharply in Spain, Ireland and Italy.

“No longer are investors sitting ready with blank checks to underwrite any amount of debt that governments wish to issue,” said Tony Crescenzi, a bond strategist at Pimco in Newport Beach.

European Central Bank President Jean-Claude Trichet tried to foster confidence on Thursday, saying he believed that Greece would make good on its promise to slash its deficit via higher taxes, a freeze on public-worker salaries and other measures.

But if austerity moves are forced on more European governments, the risk is that the continent could tilt back into recession -- which could further hammer European stock markets and commodity prices.

In an echo of the market calamity of the last few months of 2008, the dollar and U.S. Treasury securities are gaining as investors run away from risk elsewhere.

The euro sank to $1.376 Thursday, down from $1.389 on Wednesday and the lowest since May. The euro was at $1.51 as recently as late November.

The yield on two-year Treasury notes slid to 0.80% from 0.88% on Wednesday. The U.S. has its own giant budget deficit, of course, but for most investors the question of whether to trust Greek bonds or Treasuries is easily answered.

-- Tom Petruno

Photo: The European Central Bank's logo. Credit: Hannelore Foerster / Bloomberg News

In a replay of late last week, investors are finding plenty of reasons to sell risky assets today and few reasons to buy.

U.S. stocks are getting hammered by disappointing employment data, fresh worries about Europe’s financial system and renewed selling in popular tech issues, including Apple and Qualcomm.

Although Wall Street often cheers the idea of legislative gridlock in Washington, that prospect -- which President Obama acknowledged in his State of the Union address Wednesday -- hasn't reenergized the bulls today.

The Dow Jones industrial average was down 101 points, or 1%, to 10,134 at about 10:35 a.m. PST, though it has pulled up from a loss of 180 points earlier. Tech is by far the market’s weakest sector.

The government’s report of a 0.9% rise in non-transportation durable goods orders in December was better than economists expected, but that was offset by a smaller-than-expected drop in new weekly claims for unemployment benefits.

Europe may be the bigger worry at the moment. Stocks were broadly lower there today amid more signs of contagion from Greece’s financial woes. Investors continued to demand sharply higher yields on Greek government bonds, even though the country successfully borrowed more than $11 billion early this week via five-year notes to give itself more breathing room.

The yield on two-year Greek government notes soared to 5.21% today from 5.02% on Wednesday and 4.70% on Monday, while the country’s prime minister again denied rumors that Greece would seek financial help from Germany and France to finance its surging budget deficit.

More troubling to investors was that yields also jumped today on government bonds of Portugal, Ireland and Spain, raising the risk of a spreading crisis.

Jitters about Europe hammered the euro, which fell to its lowest level since July against the dollar, at $1.397 versus $1.404 on Wednesday.

Finally, anyone hoping that Apple’s announcement of its new iPad tablet computer on Wednesday would reenergize the tech sector woke up to find Apple sinking with the rest of tech today. The shares were down $8.68, or 4.2%, to $199.20 at about 10:35 a.m. PST.

Cellphone chip-maker Qualcomm also is taking a big hit, off $6.71, or 14%, to $40.49, after warning late Wednesday that 2010 sales would be below previous expectations.

Of the 10 major industry sectors in the S&P 500, tech is the worst today, down 2.7%. Second-worst is the basic-materials sector, off 1.6%, as the rising dollar is pulling money out of commodities.

Year-to-date the tech sector is down 6.4%, versus a 2.5% loss for the S&P 500 overall.

-- Tom Petruno

Renewed fear that the global economic recovery could stall is trumping any joy Wall Street took away from Tuesday’s Republican Senate victory in Massachusetts.

Risk-takers are in a broad retreat worldwide, driving stocks and commodities down and the dollar up.

U.S. stocks are on track for their biggest drop since late November. The Dow Jones industrial average was down 165.28 points, or 1.5%, to 10,560 at about 10:50 a.m. PST, led by commodity and technology issues.

China set the scene for today’s slide: Overnight, the Chinese government took another step to restrain bank lending, trying to head off what many analysts have called an asset bubble fueled by cheap money. But any move to tighten credit raises the potential for a hard landing for China's fast-growing economy, which obviously could have worldwide implications.

A week ago Chinese authorities ordered banks to increase the reserves they hold. Today Liu Mingkang, chairman of the China  Banking Regulatory Commission, said some banks have been told to limit lending.

"Corrective actions" have been taken against banks that were lending too aggressively, he said.

The government’s latest moves drove the Shanghai composite stock index down 2.9%.

European markets also slumped, hit by fresh worries that Greece will have trouble selling more bonds to finance its yawning budget deficit. That could deal another severe blow to Europe's fragile financial system.

The yield on two-year Greek government notes soared to 4.33% from 3.77% on Tuesday. (The U.S. two-year Treasury note yield, by comparison: a mere 0.87%.)

With investors and traders suddenly looking for shelter, the old standby -- the dollar -- is the day’s big winner. The euro has dropped to a five-month low of $1.411 from $1.429 on Tuesday. As usual, a stronger dollar is drawing money away from commodity markets. Gold is down $27 to $1,113 an ounce.

On Wall Street, which hit new 15-month highs on Tuesday, today’s big losers are stocks tied to the economy’s fortunes. Of the Standard & Poor’s 500 index’s 10 major industry sectors, shares of commodity and energy issues are bearing the brunt of the day’s selling. Not far behind are technology and industrial issues.

By contrast, the sectors holding up the best today are financials and healthcare -- both of which are seen as winners in the wake of Republicans’ capture of the Massachusetts U.S. Senate seat held by the late Ted Kennedy.

With the GOP’s victory, Democrats lost the 60-vote Senate majority needed to block Republican filibusters. That could derail the Obama administration’s plans to reform the healthcare system and banking regulation.

The S&P financial-stock sector was off 0.4% at about 10:50 a.m. PST, compared with a 1.4% loss for the S&P 500 overall. The healthcare stock sector was down 1%.

-- Tom Petruno

Photo: Liu Mingkang, chairman of the China Banking Regulatory Commission. Credit: Jerome Favre / Bloomberg News

Risk-takers were in control in world markets Monday as stocks and commodities rallied on the first trading day of the new year.

If buyers can keep the upper hand all week they’ll send an encouraging signal about 2010: Historically, Wall Street’s trend in the first five days of the year has been a highly reliable indicator of the market’s direction for the year.

Fresh economic data encouraged market bulls Monday, as did a weaker dollar. Energy stocks led the Standard & Poor’s 500 index higher as oil jumped to a 14-month high, closing above $81 a barrel, amid a new blast of cold weather in the eastern U.S.

But stocks’ rally broadened well beyond energy. Rising issues outnumbered losers by more than 4 to 1 on the New York Stock Exchange. All 10 major stock industry groups in the S&P 500 were higher for the day.

The Dow industrials were up 155.91 points, or 1.5%, to 10,583.96. The S&P rose 1.6% to 1,132.99. European and Latin American markets also posted strong gains.

With the books closed on 2009, some institutional investors on Monday may have been making asset-allocation shifts for the new year -- pumping cash into sectors they figure will do well in 2010.

That may have helped gold and other commodities in particular, said Larry Young, senior trader at Infinity Futures in Chicago. Within the Reuters/Jefferies CRB index of 19 commodities, 15 were up for the day, led by coffee, orange juice and wheat. The index surged 2.1% for the session after rising 23% in 2009.

Near-term gold futures rebounded $22.50 to $1,117.70 an ounce. Gold had tumbled in December after reaching a record high of $1,218 on Dec. 3.

Dollar weakness also usually helps commodities. The DXY index of the dollar’s value against six other currencies was off 0.5% for the session. The index had jumped 4% in December as the dollar rebounded.

As for stocks, the Dow recouped all 120 of the points it lost on Thursday, when the market slumped in the final 30 minutes of trading for the year.

Wall Street pays a lot of attention to the market’s tone at the start of the year: Since 1950 the net change in the S&P 500 in the first five days of the year has signaled its direction for the year 72% of the time, according to the Stock Trader’s Almanac. Last year, the S&P was up 0.7% in the first five days; it rose 23% for the year, despite falling to 12-year lows in March.

Just note, though, that when the first-five-days barometer fails to work it can be painful. The S&P was up 1.1% in the first five sessions of 2002 -- but still slumped 23% that year. And the Almanac notes that the barometer's track record is "spotty" in mid-term election years, and we're in one in 2010.

-- Tom Petruno

Photo credit: Richard Drew / Associated Press