This week is shaping up to be the most volatile five days of trading so far in 2012. While the Dow Jones Industrial Average (INDEX: ^DJI ) plummeted on Monday and Tuesday, the index bounced back on Wednesday and is now closing in on 13,000. Both the Dow and the S&P 500 (INDEX: ^GSPC ) have climbed around 1.2% in intraday trading.
Memories of 2011's tumultuous market are creeping into investor's minds as the risk-on, risk-off mentality becomes more evident. Fellow Fool Morgan Housel recently described the remarkably quiet few months we've experienced to kick off the year. In the words of CNNMoney columnist Paul La Monica, watching the stock market has been "mind-numbingly dull."
The market might be shifting gears, however, and the increased activity can be both exciting and alarming for investors. One of the major story lines this week revolves around Europe, which seems to be addressing the same old crisis with a slightly different twist. European stocks hit a 10-week low on Tuesday, reacting to both the weaker U.S. jobs report and the new model of an overburdened government: Spain. Spanish stocks actually hit a three-year low and bond yields ticked up, prompting the European Central Bank to comment that actions would be taken to address growth concerns (or kick the can further down the road). The FTSE 100 (INDEX: ^FTSE ) responded by rising 2% the following two days.
Perhaps the dismal outlook for many European countries is causing global investors to find the American markets more attractive. While it is reassuring that the ECB is willing to step in and take action, any missteps could very well send Europe into years of stagnation. Whether the American markets would get tied up in the turmoil is hard to say, however, and some economists have noted that such a situation might only make our companies more competitive relative to their European counterparts. This could bode well for Dow conglomerates like General Electric (NYSE: GE ) , which competes head-to-head with Germany's Siemens (NYSE: SI ) across many industries. GE is set to report earnings on April 20.
Before GE reports, however, investors will gain perspective from more than a few Dow stocks' earnings announcements. In fact, Alcoa already set the tone earlier this week with a strong report that showed a $0.10 per share gain, which easily topped estimates of a $0.04 per share loss.
Overall, the Dow appears detached from the potentially severe crisis in Europe and focused on the outlook for the major components. Investors should probably do the same. If you're looking for undervalued stocks that will thrive even in a bumpy market, I highly recommend reading our recent report, "3 Stocks That Will Help You Retire Rich." We made our best analyst research free for a limited time -- download your copy now.