After five weeks in a slump, US investors turned their backs on more worrisome news from Europe and poor US economic data to deliver the markets their best week so far this year.
With Spain’s banking sector plunging into crisis mode, Greece edging toward make-or-break elections next Sunday and China acknowledging its sharp slowdown, the US dollar and US stocks appeared to be two of the few choices investors were ready to play with.
“It may not feel like it, in the wake of last week’s disappointing jobs report and the subsequent market plunge, but the major averages posted their best week of 2012, ending with another up day,” Charles Schwab & Co analysts said.
“As Spain’s economic issues remain in the headlines and Greek elections [are] slated for next week, the Street was expecting some heavy selling this afternoon, with traders wanting to avoid holding onto anything over the weekend, but that didn’t happen,” Ryan Detrick of Schaeffer’s Investment Research said.
The numbers were solid: the Dow Jones Industrial Average of 30 blue chips gained 3.58 percent for the week to 12,554.20; the broader S&P 500 did better with a 3.73 percent gain to 1,325.66; and the tech stock-heavy NASDAQ outperformed both with a 4.04 percent rise, to 2,858.42.
The return to bullishness pulled the Dow back into the black for the year, after it closed out the previous week underwater for the first time since Jan. 1.
Besides the eurozone crisis, investors shirked off both the US Federal Reserve’s dull report on regional economies and also Fed Chairman Ben Bernanke’s failure to give any hint of more stimulus for the economy.
However, China proved encouraging, cutting its key interest rate for the first time since 2008, by a quarter-point, signaling that the government was ready to battle the slowdown and help the global economy.
“China ... is coming off of a two-year tightening cycle, with ample room to ease. As such, we expect China’s central bank to ease further to complement a ramp-up in fiscal stimulus,” economists Paul Edelstein and Nigel Gault at IHS Global Insight said.
That move helped stocks sensitive to China, like commodities and some industrials.
However, banks were the big winners for the week: Bank of America surged 7.7 percent, Wells Fargo 4.2 percent, JPMorgan Chase 5.5 percent and Citigroup 9.4 percent.
Boeing picked up 4 percent; Wal-Mart jumped on Friday on strong sales in Mexico to end 4.1 percent higher for the week; Home Depot climbed 9.2 percent; Ford rose 5.3 percent, and Disney 4.1 percent.
In tech stocks, Intel and Hewlett-Packard each leaped 5 percent, Apple 3.5 percent, Microsoft 4.2 percent, and Oracle 4.5 percent.
The situation of Spanish banks could still hang over the markets and the countdown to Greece’s election, which could set the country’s fate inside or outside of the eurozone, will begin.
“The global financial fallout could be significant” if Greece pulls out, Wells Fargo said.
Indeed, Moody’s warned on Friday that a Greek pullout could possibly result in a credit downgrade of Europe’s strongest economies, including Germany.