Sun, Dec 19, 2010 - Page 10 News List

Wall Street enters week with Christmas cheer

HO HO HO:Analysts expect stocks to show just modest gains this week, as many traders have already cashed in profits over the past few weeks amid growing optimism

AFP, NEW YORK

Wall Street will move into low gear this week ahead of the Christmas holiday, but traders will keep a close eye on a trickle of US data and Europe’s struggle to contain its debt troubles.

Last week saw stocks close slightly higher amid an encouraging sharp drop in weekly jobless claims and a robust rise in housing construction and manufacturing.

Sentiment was further lifted after the US Congress late on Thursday approved the extension of a sweeping tax cuts and jobless benefits deal that analysts expect to boost the country’s economic growth next year.

US President Barack Obama signed the bill into law shortly after markets closed on Friday.

“In what was a very busy week for economic indicators, the theme was generally better-than-expected readings on the economy, which is consistent with our outlook for steadily improving growth in the next couple of years,” analysts at Wells Fargo Advisors said in a note.

In the week to Friday, the Dow Jones Industrial Average rose 0.72 percent to 11,491.91, after reaching its highest level since September 2008 on Thursday.

The broader S&P 500 index added 0.28 percent to 1,243.91 points, while the technology-rich NASDAQ composite index rose 0.21 percent to 2,642.97 points.

Though traditionally considered a period of profit-making, analysts expect stocks to move modestly up in the week ahead — cut short by Christmas day on Friday — as many traders have already cashed in profits in recent weeks amid growing optimism.

“Historically, we see a nice move for the market into the end of the year buoyed by sentiment that the season brings, but this year it wouldn’t surprise me if it continues to be muted until December 31,” analyst David Levy of Texas-based Kenjol Capital Management said.

Several key economic indicators are to be released in the week ahead, led by the third estimate of US third-quarter GDP, which -analysts expect to be revised slightly higher to 2.6 percent.

Other data includes existing home sales, personal spending and manufacturing data, which are all forecast to notch up in keeping with recent data that has pointed to a slow but steady economic recovery.

“There is plenty of economic data to come out, some companies will report their earnings, but generally speaking the last two weeks of the year are pretty slow,” Miller Tabak chief economic strategist Dan Greenhaus said.

The main source of concern to global markets will remain Europe’s efforts to deal with the major threat of member states going broke under massive debts, following Ireland and Greece.

Over the past week alone, Moody’s downgraded Ireland’s rating and threatened to slash that of Spain and Greece, once again, due to their high debt levels.

“The one wild card [on Wall Street] could be something happening in Europe,” Levy said.

“In the last several days we’ve seen downgrades of various countries’ sovereign debt, and so far the US market has chosen to largely ignore the news out of Europe and instead favoring better economic news and stronger corporate outlook in the US,” he told reporters.

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