After a historic week for Wall Street that lifted the main blue-chip index above 10,000 points, investors are mulling whether the stock market rally is over or just getting started.
The rise of the Dow Jones Industrial Average above 10,000 sparked a spate of celebrations, but also provoked some skepticism about whether the market has gotten ahead of the economy and corporate earnings.
The market had already begun a pullback with a selloff on Friday, and the direction may be determined by the raft of corporate earnings in the coming week and economic reports, notably in housing.
In the week to Friday, the blue-chip Dow climbed 1.33 percent to end at 9,995.91 as it failed to hold above the key level of 10,000.
The Standard & Poor’s 500 broad-market index advanced 1.51 percent to 1,087.68 and the tech-heavy NASDAQ composite added 0.82 percent on the week to 2,156.80.
Gains over the past week were inspired by better-than-expected earnings from key firms including JPMorgan Chase, Goldman Sachs and Google, among others.
But the mood was dampened by disappointing results later in the week from Bank of America and General Electric.
Fred Dickson, chief market strategist at DA Davidson & Co, said the 10,000 level on the Dow is “a signpost on the investment highway marking a significant distance recently covered, but not offering any clues about the market’s speed limit or upcoming opportunities or obstacles.”
“A milestone such as 10,000 may trigger some pre-programmed selling, but on the other hand it should provide a renewed sense of confidence that the six month market rally is real and that investors should see continuing incremental improvement in the prospects of the US economy,” he added.
Bill George, a professor of management practice at Harvard Business School, said the 10,000-level is nothing to get excited about.
“This purported milestone isn’t a victory. It’s nonsense,” he said. “We are far from out of the woods. Large companies are still laying off employees. When we cross the 10 percent unemployment line, consumer spending may contract even further.”
Julian Callow at Barclays Capital said economic and corporate reports have been getting better, suggesting better momentum in the US and other major economies.
“Part of the reason to pay close attention to earnings is that profitability tends to lead investment,” he said. “This suggests that the anticipated strong recovery in operating profits [helped by strong productivity data from the US] ought to drive investment higher.”
Bonds ended lower for the week. The yield on the 10-year Treasury bond rose to 3.417 percent from 3.384 percent a week earlier and that on the 30-year bond edged up to 4.247 percent from 4.227 percent.
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