Sun, Jul 24, 2005 - Page 10 News List

Wall Street rally keeps going despite upheaval

RESILIENT Investors shrugged off concerns about the yuan revaluation and security scares in London, focusing instead on a favorable corporate and economic outlook


The summer rally on Wall Street remains intact, with the market showing resilience despite turmoil over the past week from fresh security incidents in London and the shock of China's move to devalue the yuan.

Notching a fourth straight positive week, the Dow Jones Industrial Average eked out a gain of 0.10 percent to close Friday at 10,651.18.

The Standard and Poor's 500 broad-market index pushed to a fresh four-year high with a weekly gain of 0.47 percent at 1,233.68.

The tech-heavy NASDAQ index added 1.06 percent for the week to 2,179.74.

The major events of the week were both surprises -- the incidents in London that rekindled fears of terror two weeks after a series of deadly blasts, and the move to end the yuan's fixed rate to the dollar and repeg it to a basket of currencies in a "managed float."

Investors managed to shrug off concerns about how China's shift may affect the bond and currency markets, and focused instead on what appears to be a favorable corporate and economic outlook.

"The outlook is positive. The rally will extend during the summer months," said Peter Cardillo, market strategist at SW Bach.

"We're going to continue to see good economic numbers," he said while cautioning that high oil prices could cause problems ahead.

"Things are about as good as they get," said David Wyss, chief economist at Standard and Poor's, who pegged economic growth at 3.7 percent, inflation at two percent and unemployment at five percent.

"This trend is going to continue for the next several quarters," Wyss said.

The market faced additional turbulence over the past week after earnings reports from some high-profile companies such as Yahoo, Intel and Google.

But analysts said the overall picture remains positive, evoking comparisons to the "Goldilocks" economic scenario of the 1990s that was described as not too hot or too cold.

"None of this mucking and grinding should obscure the larger point that the equity environment appears positive, and a `Goldilocks-lite' scenario could be in the cards," said Stephen Auth at Federated Investments.

"This is a less-intense version of the late-1990s scenario, when economic growth was good and inflation was moderate," he said.

Additionally, Auth said investors are looking ahead to an end to the cycle of interest rate increases from the Federal Reserve even though chairman Alan Greenspan has offered no hints in that direction.

"Mr. Greenspan seemed to imply that the Fed would continue raising interest rates, at least through its next meeting in August," Auth said.

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