On Wall Street: Not Much Fun, But It Sure Was Interesting

This week on Wall Street, investors experienced thrills, chills, tears and giggles as their investments plunged, soared, dropped, rose, dipped, moved sideways — and then ended about where they started.

On Friday, the Dow Jones industrial average inched down 12 points to 16,643 for the day, ending a bit higher than last Friday's 16,459 close.

So if you just got back from spending a week on a tiny desert island with no smartphone, you might look at the Dow's close and think it was a pretty tame week.

You would be very, very wrong.

This was one of the most volatile weeks in years for markets all over the world. Stocks, commodities and currencies whipsawed up and down as investors tried to make sense of conflicting economic news. On one side of the seesaw, there was terrible news out of China, suggesting that manufacturing there was slowing much more than economists had thought.

If China, the world's second-largest economy, really is slowing dramatically, then it will be buying far fewer commodities, like coal, copper, iron ore and so on. Reduced demand would beat down the developing countries that produce many commodities, and that in turn would slow the whole global economy and hurt a lot of currencies.

So panic selling broke out everywhere on Monday morning — in Asia, Europe and the U.S.

But wait.

On the other end of the seesaw, the U.S. economy started moving up. A revision of the second-quarter gross domestic product turned up evidence of much stronger growth. And other reports showed durable-goods orders and consumer spending rose in July. Personal income was up too.

So through the week, the global investing narrative kept shifting from a scary story about China to a cheery one about the United States.

Also contributing to the ups and downs were conflicting rumors about whether the Federal Reserve would raise interest rates next month. All of this caused big stock-price swings, often within the same hour.

There's a measure of market shifts, based on S&P 500 options. It's called the CBOE Volatility Index, or VIX, and it rose 5.5 percent to 27.53 on Friday. That was well above its 10-year average of about 20 for the sixth straight session.

As the week's dust settled, the winners were the U.S. and European markets, which both rose a bit. But Chinese stocks, as measured by the Shanghai Composite, had lost nearly 8 percent for the week.

If you want quiet, steady growth in your retirement savings, then you might want to close your eyes and brace yourself: Analysts are saying the volatility will continue, at least until the Federal Reserve's intentions are clear.

Those coming market swings may have negative effects on the broader economy.

As measured by the University of Michigan Consumer Sentiment Index, Americans' confidence is starting to falter, dropping 1.2 points to 91.9 this month, a report showed Friday.

Americans are becoming "more pessimistic in their economic and financial outlook due to the volatility in equity markets and worries over the financial issues in China and Greece," IHS Global Insight economist Chris Christopher said in his analysis.

"If the U.S. stock markets stabilize, consumer sentiment is likely to respond to fundamentals — lower energy prices, improved job prospects, a housing market that is gaining traction, and modest consumer price inflation. Looking ahead, we expect consumer confidence to rebound in the coming months, if and only if, financial markets cooperate," he wrote.