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After losing ground for five straight days, U.S. stocks rallied today. All three of the major indexes were up. The Dow added about 300 points. The story in Europe today could not have been more different. Stocks plunged in Paris, Frankfurt and London.
This week, there has been a gradual realization that the rest of the world may still dependent on a strong U.S. economy. But the approach taken by central bankers in the U.S. and in Europe is diverging.
And as NPR's Jim Zarroli reports, that could cause more problems.
JIM ZARROLI: It was the kind of opening that could take an investor's breath away. Once again, the day started with a steep plunge. The Dow and the Nasdaq composite indexes lost 2 percent of their value. But just like yesterday, they rebounded, and by the end of the day, stocks had reversed course and finished the day a lot higher.
At the offices of the trading firm Miller Tabak in Manhattan, technical analyst Phil Roth is trying to make sense of the week's gyrations.
Mr. PHIL ROTH (Technical Analyst, Miller Tabak & Co.): We have seen for the last two days, sharp sell-off, sharp rally, sharp sell-off, sharp rally, and it reflects uncertainty and nervous traders but still willingness(ph) to bargain on.
ZARROLI: Roth says the Federal Reserve's unexpected three-quarter point interest rate cut yesterday had helped the market. But there's also been a lot of bad news about corporate earnings. Most recently, both Apple and Motorola issued disappointing forecasts.
Mr. ROTH: We have fourth-quarter earnings coming in and they're bad. And they're having an impact. So both elements are present. Bad earnings, declining interest rates, and the market is just going to flip-flop back and forth from one to the other.
ZARROLI: The good news today was that oil prices fell again to a little over $87 a barrel. But that wasn't enough to satisfy investors in Europe, and the main German stock index fell nearly 5 percent. The fact that yesterday's big rate cut hasn't helped the European market more is something many analysts are puzzling over.
Economist David Resler of Nomura Securities International says it may be that the remarkable nature of the cut coming between Fed meetings may have made some people nervous.
Mr. DAVID RESLER (Economist, Nomura Securities International): Some interpret that as an indication that the Fed knows things now that we're only going to learn down the road.
ZARROLI: Resler says he doesn't believe that's the case but it's a reflection of how nervous a lot of investors are and of how mixed the economic picture is.
Even as the Federal Reserve is cutting rates, the head of the European Central Bank said today he'll do no such thing. The economy is stronger there, and he's worried it will lead to higher inflation.
Adam Posen of the Peterson Institute for International Economics says the disparity in interest rates will cost investment dollars to flow toward Europe and away from the United States.
Mr. ADAM POSEN (Deputy Director, Peterson Institute for International Economics): This will, over the near term, make it harder to get credit in the U.S., but it will, over the longer term, create demand for U.S. assets because U.S. assets will cheap.
ZARROLI: And it will cause U.S. exports to grow because it will make American goods less expensive overseas. Posen says despite the European Central Bank's position, there is a growing sense overseas that the problems in the American mortgage market can't be contained, and that sooner or later, the euro soon will slow down as well.
That is one big reason behind this week's sell-off overseas. And it also suggests just how volatile the weeks ahead could be.
Jim Zarroli, NPR News, New York.