Sun, Oct 22, 2006 - Page 10 News List

US investors celebrate `fantastic week'

PSYCHOLOGICAL BARRIER After the Dow Jones entered uncharted territory above 12,000 points on Thursday, it charged still higher on Friday as oil prices fell sharply


US investors cheered a record-breaking week on Wall Street on Friday which saw the leading Dow Jones index smash the 12,000-point barrier for the first time.

However, market analysts said some profit-taking was likely early next week in the run-up to a two-day US Federal Reserve meeting starting on Tuesday.

In the week to Friday, the Dow Jones Industrial Average of 30 blue-chip stocks climbed 0.35 percent to end at 12,002.37.

The NASDAQ composite shed 0.64 percent to 2,342.30 while the broad-market Standard and Poor's 500 increased 0.22 percent on the week to 1,368.60. The Dow entered uncharted territory during the week to close at a record high of 12,011.73 on Thursday.

The index charged higher as oil prices fell sharply and as a flurry of robust third-quarter corporate earnings renewed Wall Street's optimism.

"We have had a fantastic week," said Art Hogan, an analyst at Jefferies.

"The 12,000 points were possible thanks to a combination of factors: low energy prices, stabilized interest rates, positive earnings," Hogan said.

Third-quarter earnings news from Google, IBM, Citigroup, Bank of America, McDonald's and Coca-Cola were all upbeat. But the US economy continues to be lackluster.

The Conference Board said this past week that its index of future US economic activity rose a meager 0.1 percent in September, as weakness in the housing market and in manufacturing dragged on growth.

The index of leading US indicators suggested that the world's biggest economy will struggle to find momentum in the next six to nine months.

Because of that outlook, most economists expect that the Fed's policy-making committee will opt to keep its key interest rate pegged at 5.25 percent on Wednesday.

It would mark the third straight meeting that the Fed has kept rates on pause, following 17 consecutive hikes designed to keep a cap on inflation.

"Our take is that some near-term caution may be in order," said Frederic Dickson, an analyst at DA Davidson and Co.

"We do not expect to see a major market pullback, but [some] profit-taking ahead of the Federal Reserve open market committee meeting," Dickson said.

No economic reports are due to be released before the Fed meeting, although a snapshot on existing home sales will be released as policymakers meet on Wednesday morning.

Most economists expect September sales of existing homes across the US to slow to 6.25 million units, against 6.30 million units in August. That will be followed over the week with updates on durable goods orders, new home sales, and an initial estimate of third-quarter GDP.

Most economists expect the US Commerce Department report to reveal that third-quarter GDP slowed to 2.2 percent, from the second-quarter's 2.6-percent pace and 5.6 percent in the first three months.

Some analysts said they expect the Dow's blistering run of recent weeks to be tempered by the Nov. 7 US mid-term elections, which some polls suggest could see the Democrats retake control of Congress.

"It would be very normal for the markets to take a pause and a refresh, maybe before the November mid-term elections," AG Edwards analyst Al Goldman said.

Bond prices weakened in the past week as money shifted to stocks.

The yield on the 10-year Treasury bond fell to 4.784 percent from 4.806 percent a week earlier, while that on the 30-year bond declined to 4.904 percent from 4.938 percent. Bond yields and prices move in opposite directions.

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