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Wall Street claws its way back to blue-chip record

Wall Street has been able to shake off worries about a slowing US economy, and has inched closer to a blue-chip record high as the market enters the heart of the corporate earnings season.

In the week to Friday, the Dow Jones Industrial Average gained 0.41 percent to 12,612.13 and has clawed back to within striking distance of its all-time high on Feb. 20 of 12,786.64.

The broad-market Standard & Poor's 500 index gained 0.62 percent for the week to 1,452.85 and the tech-heavy NASDAQ composite added 0.83 percent to 2,491.94.

The gains came even after a lowering of the outlook for US economic growth by the International Monetary Fund to 2.2 percent for 2007 -- below the forecast of the Federal Reserve -- and some nettlesome news on inflation.

"The stock market continues to hang tough despite worsening fundamentals," said Dick Green, analyst at Briefing.com.

"Expectations for every key fundamental factor have moved in a bearish direction. This has occurred over the past month even while the stock market has recovered. April has been the best month for the stock market over the past 50 years, and perhaps seasonal trends are giving a boost now. Over time, however, the difficult fundamental outlook limits the upside potential," he said.

The market maintained its momentum even after the government said US wholesale prices jumped 1 percent in March. The "core" index excluding food and energy was flat, but some analysts say inflation remains a concern for the economy and makes it hard for the Fed to stimulate growth with lower interest rates.

"The Fed's easy time is over. It is between a rock and a hard place," David Kotok at Cumberland Advisors said.

"The Fed won't raise rates soon because of the economic data. They cannot lower them because the sacrifice ratio is too high and the inflation news is worsening," he said.

Markets have become resigned to the fact that no interest rate cut is coming, and now turn to the spate of earnings news that provides a snapshot of corporate America's health.

The news on the earnings front is also lukewarm.

The market expected profit growth in the range of three to four percent after a long string of double-digit growth, said Bob Doll, chief investment officer at Blackrock.

Doll said that despite slowing economic growth and weakening corporate profits growth, "we do not believe these events will mark the end of the current bull market."

Bond values declined over the past week. The yield on the 10-year Treasury bond rose to 4.761 percent against 4.674 percent a week earlier while the 30-year bond yield increased to 4.926 percent from 4.868.
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