NEW YORK (MarketWatch) -- It was mostly smooth sailing for stocks during the first week of earnings until Friday, when news of Goldman Sachs' troubles with regulators cast over Wall Street a cloud of uncertainty almost as thick as the volcanic ash above Iceland.
AM Report: More Delays From Volcano
Kaveri Niththyananthan of Dow Jones Newswires discusses the latest disruptions from Iceland's volcanic eruption.
Friday's news that the Securities and Exchange Commission is charging Goldman Sachs /quotes/comstock/13*!gs/quotes/nls/gs (GS 160.70, -23.57, -12.79%) with fraud over its handling of securities tied to subprime mortgages felt more like another unexpected aftershock of the financial-crisis earthquake.
The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 11,019, -125.91, -1.13%) sank 125 points, although it stayed above the 11,000 mark. The Chicago Board Options Exchange volatility index, or /quotes/comstock/20m!i:vix (VIX 18.36, +2.47, +15.54%) , also known as the market's fear gauge, jumped or 15% after plumbing 30-month lows all week.
The broad S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,192, -19.54, -1.61%) lost all of its weekly gains in one day and fell for the first week in seven.
The fact that regulators were looking into Wall Street firms' shady practices in the wake of the most devastating financial crisis and economic downturns since the 1929 crash and the Great Depression shouldn't have been a surprise to investors.
But in some ways, it was similar to the way Iceland, one of the industrialized countries most hit by the financial crisis, brought itself back at the top of media headlines as its erupting volcano grounded thousands of intercontinental flights.
The eruption of the Iceland volcano had been monitored by air traffic controllers for a while.
"We've known about this for weeks," a British Airways pilot told me after he became stranded in New York City on Thursday while flights going back to the U.K. were postponed.
Before the cloud got this large, he said, pilots would actually make detours on their routes, when possible, to allow themselves and passengers to check out the amazing sight of the gigantic cloud.
By the time the cloud got so large it became a danger for air traffic and made headlines around the globe, British Airways /quotes/comstock/23s!a:bay (UK:BAY 235.00, -7.60, -3.13%) was ready to apply drastic measures to ground its entire fleet of 247 aircraft.
It's too bad for the stock of British Airways, though, as it appears that the air carrier, along with all the other airlines that had to cancel thousands of intercontinental flights, wasn't insured for such an event.
But the safety of passengers, and of people on the ground, came first.
Governments, not Wall Street, are in charge
Perhaps investors will eventually feel the same way about the shares of Goldman Sachs, one of the Wall Street giants that has benefited from the unprecedented global rescue of the financial system orchestrated by central banks and governments around the world two years ago.
The rescue was two-pronged: 1) Massive amounts of liquidity to boost lending while credit markets were frozen and then remained fairly anemic. 2) Fiscal spending to boost economies as unemployment soared and consumer and business spending ground to halt.
The measures have worked by and large to revive the global economy, as shown by the return of the U.S. economy to growth in the third quarter of last year and as employment finally began to improve in March.
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