Sun, Nov 08, 2015 - Page 15 News List

Some expect pause as US stocks rise for sixth week

AFP, NEW YORK

US stocks notched a sixth straight week of gains behind improving economic data, but analysts warned the rising odds of higher interest rates will challenge the durability of the rally.

Meeschaert Capital Markets president Gregori Volokhine said the increasing likelihood of higher US interest rates pushed the US dollar up this week, a market move with broad implications for equities in the weeks ahead.

“A strong dollar is not a guaranteed positive for everyone, especially energy producers and US exporters,” Volokhine said. “The market must digest this rally.”

There is also a sense US stocks must pause after climbing so far so fast.

“We’ve come a long way and the market needs to take a breather while it digests the information,” Ventura Wealth Management portfolio strategist Tom Cahill said. “The S&P 500 is moving into a resistance area around 2,100 and it’s going to take some time to build up the strength to go through that.”

For the week, the Dow Jones Industrial Average rose 246.79 points (1.40 percent) to 17,910.33.

The broad-based S&P 500 added 19.84 (0.95 percent) at 2,099.20, while the tech-rich NASDAQ Composite Index advanced 93.37 (1.85 percent) to 5,147.12.

News was dominated by the US Federal Reserve and the implications of economic data for US monetary policy.

On Wednesday, Federal Reserve Chair Janet Yellen told a congressional panel a hike next month in interest rates was a “live possibility” with the US economy improving.

Those odds increased significantly on Friday after the US Department of Labor reported that the US economy added 271,000 jobs last month, 90,000 more than analysts expected. The agency also reported a solid 2.5 percent rise in average hourly pay.

“This gives the Federal Reserve all the ammunition it needs to justify moving rates in December,” Cornerstone Wealth Management chief investment officer Alan Skrainka said. “If they backed off now, I think all of us would have whiplash.”

The Institute for Supply Management offered a lackluster reading on manufacturing sector activity, but other economic data were solid. Construction spending in September came in at a seven-year high, while the ISM’s report on the service sector rose. US auto sales also had another strong month last month.

In earnings news, Walt Disney Co enjoyed a 7.3 percent rise in quarterly profits to US$1.6 billion thanks to its ESPN sports network and parks and resorts business, but Rupert Murdoch’s Twenty-First Century Fox Inc saw profits tumble 35 percent to US$675 million due, in part to dismal performance of the Fantastic Four movie.

Facebook Inc became the latest big tech company to wow markets, garnering an 11 percent rise in third-quarter profits to US$891 million behind a 41 percent surge in revenues to US$4.5 billion, with big gains in mobile advertising.

The week’s disappointments included online coupon company Groupon Inc, which reported a net loss of US$27.6 million in the third quarter and announced that chief operating officer Rich Williams would take over as chief executive. Investors were unimpressed, dumping Groupon shares 26.4 percent for the week.

The week saw several small and medium-sized acquisitions, including the US$5.9 billion takeover of Candy Crush videogame creator King Digital Entertainment PLC by Activision Blizzard Inc.

Next week’s calendar includes the retail sales report for last month, as well as earnings from Viacom Inc and Cisco Systems Inc. McDonald’s Corp will also hold an investor day in New York, where it is expected to update the market on its turnaround plan.

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