It all started in China, when a revised index scared investors around the globe that one of the economic powerhouses could slow. Then everyone remembered the European debt crisis, and by the time the bell rang in New York, the Dow was below 10,000. By the end of the day it was at 9870.30, down 268.22 points and 2.7%, its largest one day decline since June 4th.

All the big tech companies were down, Microsoft, Apple, and Amazon. Investors are unsure whether recovery will continue or we’re in for a double dip. Moving away from risk and volatility, bond markets surged, and the yield on Treasurys dropped below 3% for the first time since April 2009. Deflation remains a worry for many, as summer means slowing trade.

Many economists, including those in the Obama administration, are pushing for continued stimulus in order not to fall into a depression of low consumer spending and high unemployment rates. But European countries, already strapped, prefer just the opposite, following Germany’s austerity measures. Depression looks to be closer than everyone thought, as Bill Boehner, Speaker of the House hopeful, advocates a retirement age of 70, and major cuts in Social Security, which might not be a bad thing. Hopefully, it’s just the nervous nellies.

Private equity firms have billions of dollars to spend – and it’s time they did. Unused money, called in the industry, dry powder, is bad news for hedge funds. Typically these funds last 10 years and dry powder is invested within the first 3 to 5. Either the money must be invested or returned to clients. So big boom money that was given back in 2006 and 2007 is ready to be absorbed into the market – sending equity firms scrambling for deals.

Some firms are asking clients for more time, others are rushing into potential bargains. But there is great risk involved on those cheap companies, and it is uncertain as to whether it will pay off. A lot of money is being invested in foreign – Brazilian and Indian- companies. But with all the mounting pressure, it may be hard for firms to find consistent investments.

In the banking world, a new financial bill is making its way through Congress, allowing failing or near failing banks to wait a few years in hopes that they’re paid back for loans. Small banks and businesses are having trouble giving and receiving loans, so a $30 billion stimulus should help, the House hopes.  Pretending that these banks haven’t lost money may not be the best way to financial recovery, but at this point, it may be too early to tell.

Estonia joined the E.U. yesterday, becoming the 17th member. The small Baltic state will switch from the kroon to the Euro on Jan. 1 2011.. There remains mild concern over the sinking currency, as voiced by Dmitri Medvedev. Austerity measures are being enacted all around the Euro Zone – France will up their retirement age to – gasp! – 62! and Germany, watching Greece, Spain and Portugal, hesitates to to inject money into their market to increase spending.

At home, interest rates are still low, easing fears that the economy could double dip. BP agreed to a $20 billion fund to help Gulf Coast residents, and Obama was booed for his Oval Office address. He warned that stimulus procedures must continue in order to maintain recovery. With the G-20 conference in Toronto next week, Obama also wants Chinese consumers to continue buying, by allowing the remninbi to appreciate. Their export driven economy will likely keep the remnibi where it is, or inch it ever so higher, due to its recent strength against the decreasing Euro.

All in all, people aren’t really sure where we’re going. Stimulus measures must be continued, but the recession is becoming every day more a thing of the past. As Randy Frederick, director of trading for Charles Schwab put it, “None of the problems have been resolved. They have been sort of moved off the headline page.”

On Thursday the Dow was up almost three percent to 10,172. Foreign reports boosted markets as Australia had stronger than expected employment figures, New Zealand raised interest rates, Japan’s economy grew 1.2% in the first quarter, and the European Central Bank boosted its expectations for the European growth this year. China also boasted a $19.5 billion trade surplus in May. Although some remain confident that an economic slowdown for China is inevitable, at present, numbers don’t lie.

Here, weekly unemployment benefit rolls fell by more than a quarter of a million to about 4.5 million, the lowest since December of 2008. While this number is continuing to improve, it is ever so slight. Unemployment is one of the most crucial aspects to an economy because it indicates general consumer confidence and the overall rate remains above 9%.

Ben Bernanke said that if markets hold, the U.S can expect 3.5% growth this year.

BP’s stock increased more than 10% yesterday, amid rising tensions between Britons and the American government, which were muted by the leaders of both nations. BP remains an important asset to the British economy, last year paying $1.4 billion in taxes.  With a revised estimate of the oil leaking daily from 20,000 to 40,000 barrels, the U.S. government requested that BP pay the salaries of U.S. workers idled from the embargo on deepwater drilling. BP may have to cut dividends this quarter.

New job data is helping American markets as 55,000 jobs were added to the private sector during May, while jobless claims fell. Tomorrow’s job data is expected to boost markets higher.

Euro jitters are still around though, and overgrowth in Asia was expected to dampen the markets.  World wide factory activity grew this month however, with  only Greece and Hungary contracting. India, Japan, Ireland, Turkey, Switzerland and the Czech Republic experienced positive growth from April.

A mix of large retailers like Macy’s, Target, and Gap reported positive growth, but fell just beneath Wall St. expectations.

Meanwhile JP Morgan was fined a record $49 million by the British Financial Services Authority, for not keeping separate its clients monies separate from the firm’s.  If these funds aren’t kept separate, then it is impossible for clients to have their funds returned if a bank fails.

It seems as though a double dip recession will be avoided, for now, at least. The Fed will likely keep interest rates at zero until early 2011. Growth continues slowly, and hopes that inflation will rise may promote action on the part of the Fed to raise interest rates.

Market trends are climbing back to normal, but slowly.