Economic Outlook: The new oil is oil

U.S. markets went from jittery to buoyant this week, given a shot in the arm by giant chip producer Intel with sales exceeding $8 billion in the second quarter.

Microchips, in a sense, are the new oil -- a barometer for a digital universe that includes smart phones, laptops, games, personal computers, hand-held office organizers and even cars.

After a fitful start to the corporate reporting season, the Dow Jones industrial average gained 2.27 percent Monday, 0.6 percent Tuesday and 3.07 percent Wednesday to start the second week.

In the midst of the upbeat mood, New York's 101-year old bank CIT Group was not given the green light to tap into additional federal assistance, as the government has concluded the bank is "small enough to fail," research analyst David Hendler at CreditSights told The New York Times Wednesday.

In turning down the bank's attempt to expand the $2.33 billion it has already received, the U.S. Treasury said in a statement there was "a very high threshold for exceptional government assistance to individual companies."

On the face of it, the move to allow CIT's fate to be decided by the whims of the market may be a left-handed way of saying the financial system is more stable now than it was when Lehman Brothers collapsed last fall.

The Federal Deposit Insurance Corp. also turned down the chance to help the lender, which holds about $75 billion in assets and needs about $6 billion in new capital to stay afloat, Hendler said.

On the other side of the globe, the National Statistics Bureau in China said the gross domestic product in that country grew 7.9 percent in the second quarter, close to the government's target of 8 percent growth, a figure that many considered a stretch when it was first announced.

"It's by now clear that the fiscal stimulus package has offset the contraction in export activity," economist Daniel Soh at Forecast told the Times.

While still a downturn from previous growth rates in China, it is also clear the government recognized the domestic market was its greatest untapped resource. The almost global recession, in that sense, turned China's economy into something more self-reliant.

But microchips, as it turns out, are not oil, after all. The U.S. Labor Department said consumer prices rose 0.7 percent in June while core prices, which exclude food and energy, rose 0.2 percent.

Oil, again, accounted for the bulk of the price movement, which economist Mickey Levy at Bank of America said was "not much of a story this month."

"The core is just moving sideways, and then you have the upward pressure on energy and gas prices," he said.

Markets around the globe turned up Thursday. In Japan, the Nikkei 225 rose 0.81 percent, while the Hang Seng index in Hong Kong rose 0.57 percent. The Singapore Straits Times gained 0.49 percent, while the S&P/ASX in Australia rose 1.81 percent.

In midday trading in London, the FTSE 100 rose 0.16 percent, while the DAX 30 in Frankfurt gained 0.61 percent. The CAC 40 in Paris rose 1 percent, while the broader DJStoxx 600 added 0.42 percent.