Wall Street stocks notched up hefty gains in the past week, setting fresh all-time highs, as investors gained confidence in the economic outlook despite mounting profit warnings from major banks.
The markets were buoyed on Friday by a monthly government report which showed improved job growth last month. The job snapshot, which showed 110,000 new jobs created last month, soothed investors fears that the economy could be facing a recession risk.
In the week to Friday, the Dow Jones Industrial Average advanced 1.21 percent to 14,066.01. The leading blue-chip index has been hovering close to a record high of 14,087.55 struck on Monday.
The broad market Standard & Poor's 500 index jumped 3.27 percent to 1,557.59, ending the week at a new record high, while the tech-laden NASDAQ soared 2.83 percent to 2,780.32.
Some analysts said the markets are still benefitting from a big cut in borrowing costs initiated by the Federal Reserve on Sept. 18 when it cuts its key federal funds short term interest rate by 0.5 percentage points to 4.75 percent.
"The market is in an uptrend," said Mace Blicksilver, a market analyst at Marblehead Asset Management. "The market is comfortable with the level of risk which is in the system."
The gains came as more banks revealed large write-downs on their market positions, particularly in mortgage-backed securities, in recent days.
Merrill Lynch & Co, Inc, a big Wall Street investment bank and brokerage, warned investors on Friday it will post a third-quarter loss because of soured bets it made on the mortgage and debt markets.
The third-quarter earnings season will start in earnest in the coming week as aluminum giant Alcoa and conglomerate General Electric reveal their latest financial results.
"Next week we'll focus mainly on the whole earnings prospects and what's going on in terms of earnings," said Marc Pado, a market analyst at Cantor Fitzgerald.
The coming week's economic diary will be relatively light, but a report on retail sales which is due to be released Friday will likely be closely watched as consumer spending accounts for some two-thirds of US economic growth.
Most economists expect retail sales for last month to strengthen to 0.5 percent, marking a gain from the 0.2 percent pace recorded in August when global markets were engulfed by a credit crunch triggered by fears over the US mortgage market.
Some analysts cautioned that corporate earnings would likely be impacted by the housing and credit woes impacting some business sectors.
"It does not appear to be a sparkling quarterly period," said Larry Wachtel, chief market analyst at Wachovia Securities.
"The comparisons will be with a strong third quarter last year, while the slowing domestic economy may slow the pace of profits. Moreover, the bottom line of many large financial companies could be impacted by the subprime [mortgage] contagion," Wachtel said.
Bond prices fell over the past week as investors shifted money into stocks.
The yield on the 10-year Treasury bond rose to 4.640 percent from 4.579 percent a week earlier, and that on the 30-year Treasury jumped to 4.871 percent against 4.833 percent. Bond prices and yields move in opposite directions.
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