Dow Dips Below 10,000 Before Rebounding

May 21, 2010 — -- After dipping briefly below 10,000 this morning, the Dow Jones industrial average closed up more than 125 points today, snapping a three-day losing streak.

The S&P 500 index also opened lower before turning positive. Both indexes are still down more than 9 percent from their recent highs. The declines are blamed in part on the European debt crisis.

"I think everybody's wondering whether Greece is going to be the Bear Stearns of nations," Art Cashin, director of floor operations at UBS, told "Good Morning America" this morning. "The fear is if they go under, it might get another set of dominoes moving."

Cashin said that Greece and other Mediterranean countries owe money to many European banks.

"If they begin to default, we could have another bank crisis not unlike the one we saw here in 2008 and 2009," he said.

But Joel L. Naroff, president and founder of Naroff Economic Advisors, said that today's rebound may be a sign that Wall Street has finally taken a more tempered outlook on the effect that Europe's woes will have on the U.S. economy.

Naroff said Europe's problems may slow the U.S.'s economic recovery but will not collapse it.

"I think what's happening is we're moving from the usual initial reaction, which is knee jerk and fear, to a more realistic reaction," he said.

Earlier today, both houses of parliament in Germany, a key player in eurozone efforts to rescue the European economy, approved the country's participation in a $1 trillion plan to aid debt-laden European countries.

The progress of the rescue plan, Naroff said, has been key to reassuring nervous investors. But, he added, Europe's problems will likely continue to keep the U.S. markets on edge for some time to come.

"Until it's really clear how the Greeks and the Spaniards and the Irish and everybody else who is an uncertain country ... will do, there's going to be volatility," he said.

Today, at least, traders may be clearing out their short positions related to Europe's debt woes -- bets that financial turmoil on the continent will continue -- in case European officials announce more aid or policy changes over the weekend, said Doug Roberts, the chief investment strategist of ChannelCapitalResearch.com.

"People don't like to leave themselves exposed over the weekend -- that's a trader's mentality," he said.