Markets' rebound not uncommon

The markets may be rational after all.

The threat of severe nuclear contamination from a Japanese nuclear reactor still looms. The outcome of the war in Libya is uncertain. Yet The Standard & Poor's 500 index ended last week up 2.7 percent. The Dow Jones industrial average rose 3.1 percent. So what happened to all that headline-driven volatility from two weeks ago? If you look at historical patterns, the rebound isn't so surprising.

Catastrophic events can move stock prices dramatically: at one point during the week after Japan's devastating earthquake and tsunami, the Dow gave up all its gains for the year. Within six trading days it had returned to where it was before the disaster.

That may seem quick, but it's not. Brian Gendreau, strategist for the Financial Network, an advisory firm, studied the effect on the Dow of six big disasters.

In four cases (Pennsylvania's Three Mile Island; the 1986 Chernobyl nuclear accident; the 2004 Indian Ocean Tsunami; and Hurricane Katrina in 2005) the index declined at first, but returned to its pre-disaster level in an average of fewer than four days. It took the Dow 15 days to recover, after the Kobe earthquake in 1995. In another case, last year's oil spill in the Gulf of Mexico, it didn't decline at all.

-- AP