There has been plenty of recent ammunition to feed skepticism in this year’s bull market, yet US stocks continued to float higher, racking up solid gains for the week.
US markets dipped on Friday after the release of weak retail sales data and middling earnings reports from banking giants JPMorgan Chase and Wells Fargo, but it was not enough to dent the considerable overall gains for the week.
The Dow Jones Industrial Average closed the week at 14,865.06, up 299.8 points, or 2.1 percent. The broad-based S&P 500 finished 35.57 points, or 2.3 percent, up at 1,588.85, while the NASDAQ Composite Index ended at 3,294.95, an increase of 91.09 points, or 2.8 percent.
Even so, the market’s unswerving zeal in the face of less-than-stellar economic reports has started to unnerve some market participants, who sense an emerging bubble that could pop painfully.
“The reality is we are in a very dangerous phase of the market,” Marblehead Asset Management director Mace Blicksilver said. “Good news is good news, bad news is good news.”
“This is a market that is built on [US] Fed[eral Reserve] easing and Bank of Japan easing. It’s not built on fantastic earnings or employment getting better. Just on the availability of lots of money that is being funneled into the stock markets,” Blicksilver added.
Until recently, data on jobs, housing and other economic performance in the early months of the year had been increasingly favorable. However, there have been some high-profile disappointments in the past two weeks.
The biggest blemish came April 5 when the US Department of Labor reported that employers added a measly 88,000 jobs last month.
The sequel to that came on Friday when the US Department of Commerce reported that retail sales fell 0.4 percent last month from February, suggesting that federal tax increases and spending cuts could now be weighing on rank-and-file consumers.
Both JPMorgan Chase and Wells Fargo reported earnings that bested analysts’ expectations, yet the numbers suggested reason for concern as both companies were hit by weak profits on lending.
In addition, JPMorgan said results were negatively affected by the reluctance of small businesses to invest, while Wells Fargo reported that its pipeline of new mortgages slowed.
Analysts generally attributed the market’s resilience to the Fed’s stay-the-course policy of promoting economic stimulus with aggressive bond-buying. The Fed this week reaffirmed the measures once again. Minutes of a policy meeting showed that the Fed might pare back the program, but only if the jobs market improves significantly.
Next week, the US government releases new data on housing starts, the consumer price index and industrial production. The Fed will also release its Beige Book, which describes regional economic conditions in the US.
Also headlining will be earnings reports from Goldman Sachs and Bank of America, and from technology giants Google Inc and Intel Corp. Other companies to report include McDonald’s Corp, Coca-Cola Co and Johnson and Johnson.