Sun, Aug 31, 2014 - Page 15 News List

S&P breaks 2,000 despite Kiev tensions

RALLY:Investors shrugged off geopolitical issues, as the US government revised up second-quarter GDP growth and the housing market showed strength


US stock markets brushed off rising tensions over Ukraine and Iraq to push through to new records, underpinned by easy money and steady growth in corporate profits.

Even as trade volumes fell to their lowest level for the year, the S&P 500 finally broke the 2,000 barrier it had threatened since June and held on to the gain as markets closed on Friday.

The Dow Jones Industrial Average set an intraday record of 17,153.80 on Tuesday, but failed to hold on to that and finished the week under the July 16 closing record of 17,138.20.

And the NASDAQ Composite continued its climb out of the dot-com crash 14 years ago, hitting its best level since then on Friday, though still more than 400 points below the pre-crash record.

The S&P closed the week up 0.8 percent at 2,003.37. The Dow rose 0.6 percent to 17,098.45 and the NASDAQ gained 0.9 percent to 4,580.27.

At that level, the S&P was up 8.4 percent since the beginning of the year and the NASDAQ 9.7 percent, while the Dow gained 3.2 percent.

Weak trading volume underpinned the modest gains.

“The lack of activity during the week was a function of some participants being away on vacation, while many others opted to stick to the sidelines ahead of a three-day weekend in the US that could feature new developments on the geopolitical front,” analysts at said.

There was no strong economic reason to sell down shares: Second-quarter GDP growth was revised upward to 4.2 percent and there were signs of strength in the housing market.

On Friday data showed consumer spending fell off 0.1 percent last month. While that came after a strong June, analysts said it underscored a key weakness in growth, rooted in the lack of wage gains since the economic crisis.

“News that consumer spending fell in July ranks as a major-league disappointment,” Sal Guatieri at BMO Capital markets said.

“The main culprit appears to be weak wages. Average hourly earnings have hardly increased after inflation, while real per capita disposable income is up a middling 1.9 percent,” he said.

Geopolitical issues — Russia’s threat in Ukraine and the continued march of jihadist Islamic State in Iraq and the Levant — were downplayed by investors.

There has been “a certain acclimation to geopolitical risks” in the market, Evariste Lefeuvre at Natixis said.

Even so, “it could always come back,” he said.

Michael James of Wedbush Securities said the market was still full of players making bearish bets, only to be pulled back in by positive news.

“We’re due for a pause. Is there any catalyst to cause that?” he asked.

The coming short trading week — after the Labor Day holiday tomorrow — brings a raft of new data on the US economy’s performance this month, capped by Friday’s monthly report on employment.

That will be watched closely for evidence for or against US Federal Reserve Chair Janet Yellen’s contention that continued slack in labor markets merits holding off on any increase in the federal funds rate, at zero since late 2008.

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