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Sun, May 18, 2008 - Page 10 News List

NYSE: Wall Street sees light at the end of the tunnel

AFP , NEW YORK

Wall Street is clawing its way back from a dismal start to the year as confidence grows about the prospects of a US economic recovery without a calamitous downturn.

The past week saw solid gains for the main indexes, as the Dow Jones Industrial Average climbed 1.9 percent to finish Friday at 12,986.80.

The Standard & Poor’s 500 broad-market index rallied 2.7 percent to 1,425.35 while the NASDAQ composite vaulted 3.4 percent for the week to 2,528.85.

The Dow blue-chip index is now lower by just 2.1 percent for the year, having recouped most losses from the first quarter. The S&P is down 2.9 percent and the NASDAQ off 4.6 percent.

“We remain impressed by stock market action,” said Al Goldman, chief market strategist at Wachovia Securities.

“Bad news is no longer killing the market, and bits of good news are well received,” he said.

“Sooner or later investors realize that the economy will eventually turn back up and the current supposed ‘insurmountable problems’ will be surmounted. This is called ‘looking beyond the valley to the peaks ahead,’ and that’s the market phase we continue to believe we are in,” Goldman said.

Economic data remain mixed. US homebuilding showed a surprisingly strong jump last month, with starts rising 8.2 percent last month from March to an annual rate of 1.032 million units.

Inflation data showed prices generally in check, but consumer confidence fell further, suggesting spending may remain weak despite a massive tax rebate program as part of the US government’s US$168 billion economic stimulus.

Linda Deussel at Federated Investors said the US economy appears to have weathered the housing and credit crisis, which would be positive for stocks.

“If we’re right, and the worst of the credit crisis is behind us, we think the key issue is the nature of the current economic slowdown, and the potential for leakage into non-financial sectors,” Deussel said.

Bonds dipped in the past week. The yield on the 10-year Treasury bond increased to 3.850 percent from 3.767 percent week earlier and that on the 30-year bond rose to 4.579 percent against 4.524 percent.

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