The markets surged as the Dow rose more than 280 points or 2.85% while the Nasdaq led the indexes higher with a gain of 3.73% on the day. With today’s gains the major indexes are now positive on the week and the Nasdaq is now higher for the year. Despite the second best trading day in the last 10 months, the markets are still set for the worst percentage performance in the month of May since 1962. Today’s rally was sparked after comments from China saying that the country is still buying Euro zone debt, easing fears of a global double dip recession. Financial stocks rose after this data but it was hard to find a down stock today. More than 90% of stocks on the NYSE rose while 494 of the 500 stocks in the S&P 500 were higher. The three stocks we picked to rally after this correction, Citigroup, Rimm, and Rig all finished higher for the day. Shares of Rig were helped by news out of BP that their “top kill” effort appeared to be helping to stem the flow of oil into the Gulf Coast. With today’s big jump in stocks the VIX volatility index fell below $30 for the first time in two weeks as investors fears were eased. Many analysts and hedge fund managers are expecting a big market run following this correction. Here at Fiscal Frenzy we expect the Dow to make a push towards the 11,000 level.

Oil prices also rose today to finish up 4% and finish at almost $75 a barrel, the highest close for oil futures in weeks. The rise in oil came with a jump in the markets as well as a high forecast for this years hurricane season.

Treasury yields rose and prices fell as investors fled these safe bonds for more risky assets as stocks appeared to be at bargain levels.

In economic news jobless claims fell but the drop was less than expected. Jobless claims came in at 460,000 compared to 474,000 for last week. The average forecast was for 455,000.

In tech news Apple maintained it’s market cap lead over long time rival Microsoft. By passing Microsoft in market cap Apple is now the largest technology company in the world, and the second largest company behind Exxon.

Shares if Citigroup rose more than 4% after the company was upgraded and the government announced a successful sale of 20% of their stake in the bank.

Today the markets dropped almost 300 points to their lowest levels in months only to recover and to have the Dow finish down just 22 points on the day.  This rally was brought on by extremely low levels in stocks that have been brought about by fears of a European collapse similar to what happened here.  The markets are still in what is considered a correction, a fall of 10% or more from their highs.  This fall was somewhat justified as the wall street recovery appeared to be too far ahead of a main street recovery.  With this drop now caused by Euro zone fears, it is Fiscal Frenzy’s opinion that the markets have bottomed and we should see a nice rally in our markets over the next few weeks as we head into earnings season towards the end of June.  One reason we see a rally in the near future is that the Euro, while a serious problem, is not a big enough fear to have caused such a steep drop in our own markets.  Fundamentally, nothing has changed in our economy for the most part, especially with all of the individual stocks that have been hit in the past few months.  This being said, lower prices and strong fundamentals have left investors with bargains across the board.  From technology to financials to energy, it is easy to find stocks that should see a significant jump in the next month.

Technology: Research in Motion (RIMM)

The famous Blackberry maker has seen its shares take a hit during this correction.  In less than two months the stock has seen a 22% decline to it’s lowest level since December of 2009.  Compare this to the Nasdaq which has fallen just 8% over the same period, shares of this smart phone maker are set for a nice rebound

Financial: Citigroup (C)

This bank was recently upgraded by Goldman Sachs but the shares remain extremely low.  Citigroup shares have fallen 24% since April 21st.  Over the same period the Dow has fallen 9% leaving Citigroup shares extremely undervalued.

Energy: Transocean (RIG)

This is a risky investment.  This is the company that made the infamous oil rig that exploded and has led to the oil leak in the Gulf Coast.  The stock appears to have been unfairly hit however.  BP has agreed to take the front of costs for the spill and cleanup and the only litigation threats that remain for RIG would be small suits from individuals or small businesses along the coast.  Since April 21st when the oil rig exploded Transocean shares have lost 38% while shares of BP have fallen just 29%.  This huge plummet can not last much longer as investors will soon realize that shares of Transocean are dirt cheap.

A slightly watered down version of Bernie Sander’s amendment to the financial reform bill allowing for an audit of the Fed over the next year has passed the Senate in a 96-0 vote. The changes made to the bill kept Congressional influence over the audit at bay to prevent political intervention in the nation’s monetary policy. Nonetheless, the amendment that passed still allows for significant flexibility in an independent audit of the Federal Reserve. As we said just a few days ago, the Fed has been exploiting its power to control the nation’s interest rate and money supply by over adjusting them and propagating periods of excessive speculative trading. The audit is one year long with a report due out three months after the year long audit is completed. It is the first real attempt to check the power of the extremely powerful and unregulated Federal Reserve and will hopefully yield results that demonstrate it’s abuse of power to the public.

Next up on the Senate’s agenda is an amendment sponsored by Senator Kaufman (D-DE) essentially mirroring the Volcker Rule the Obama administration has come out in strong support of. The amendment does not have the far-reaching support that the Fed Audit does because it does substantial damage to banking profits and is heavily lobbied against. All the same, the amendment is liable to pass because of the bipartisan support from populist Democrats and a few libertarian-leaning Republicans in the Senate. Should it pass, it would do the most to limit absurdly risky profit making devices for banks since the passage of Glass-Seagal (since repealed) over 70 years ago. We’ll have updates on how that vote turns out soon.

UPDATE 5 ET: It now seems as if the reason for the massive dip was a huge Proctor and Gamble trade well below the stock’s actual price.  Since the stock is part of the Dow, it would have been partially to blame for the collapse of the markets.  Nonetheless, the dip was not entirely because of that one Proctor and Gamble trade and the fact that the markets recovered so heftily after an error caused them to collapse shows how many people there are willing to buy back in knowing that the economy is still in a period of robust recovery.

As most of you already know the Dow Jones Industrial fell nearly 1000 points at one point today falling below 10,000 but has since managed to recover and is trading down about 350 points at the moment.  The situation is very liquid but it seems as if the Dow will finish the day around 10,500, down about what it is right now.  The numbers speak for themselves but there is plenty to be analyzed behind today’s events.  While the Dow is still down significantly over worries that Greece will not pay back its debt, it still managed to correct for the 4 minute 500 point drop that sent it down below the 10,000 mark.  Investors recognize that speculative trading will typically overreact to international events and ignore the underlying robustness of the worldwide recovery.  The fact that the markets managed to immediately rebound and stabilize (for the most part) around a more reasonable 400 point drop reveals just how strong the recovery truly is.  We may have several more bad days or we may see a big bounce tomorrow after good job numbers are released but the fact of the matter is that no matter which direction we turn the markets can only deviate so far from the overall economic rehabilitation we are witnessing and any large drop should be seen as a buying opportunity, not as a signal that everyone should sell off.  We have finally entered a period of sustained economic growth, job growth and increases in housing sales and prices.  Such fundamentals cannot be undone by an overreactive market.  The market reacting to the 1000 point drop by rebounding was a microcosm of what will happen over the next month; it will rebound from the recent downturn and get back above 11,000 without looking back.