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Sun, Mar 21, 2010 - Page 10 News List

US stocks may pause after pursuing 18-month highs

‘A PAUSE TO REFRESH’US indexes posted weekly gains after the Fed held the federal funds rate low despite slight signs of economic improvement

AFP , NEW YORK

US stocks hit the highest level in more than a year the past week, buoyed by strong company earnings and a central bank decision to maintain ultra-low interest rates, but some analysts expect a pause in the rally before any upward movement.

For the week, the Dow Jones Industrial Average rose 117 points (1.1 percent) to finish at 10,741.98 on Friday, snapping an eight-­session rally that had brought the blue-chip index to an almost 18-month high.

The broad S&P 500 index was up almost 10 points (0.8 percent) to 1,159.90 and the tech-rich NASDAQ rose 6.0 points (0.2 percent) to 2,374.41.

Most of the gains were made after the Federal Reserve maintained the benchmark federal funds rate at a record-low zero to 0.25 percent range despite slight improvements in the economy.

Positive earnings reports from several companies also lifted ­sentiment before the market turned cautious on Friday over the Greek debt crisis and India’s unexpected decision to raise rates.

“The market is short-term stretched out and ... a pause to refresh is overdue,” Wells Fargo Advisors chief market strategist Al Goldman said.

He said a mere 0.1 percent rise last month of the forward-­looking leading economic index of the business research firm The Conference Board “reminded folks that the [US] economic recovery is still rather mild.”

It was the smallest increase in 11 months of the index, held down by the manufacturing and labor market components, underscoring the nearly double-digit unemployment crisis threatening US growth.

Analysts believe the bulls will continue to drive the market but any rise will be gradual.

“A slow-motion bull market would be more long-lasting than a meltup that fizzles,” Ed Yardeni of Yardeni Research said.

Particularly encouraging, he said, was that numerous sectors and industries of the S&P 500 index had jumped to new bull-market highs in recent days. “In other words, the second year of the bull market is starting off with broad participation. That’s a good thing,” he added.

In the coming week, the US government will on Friday publish the third and final estimate of last year’s fourth-quarter GDP.

GDP — the broad measure of the country’s output — rose in the last two quarters after a year of contraction. It grew by 2.2 percent in the third quarter and a provisional 5.9 percent in the final quarter.

Most economists expect the final estimate of GDP growth will remain unchanged at 5.9 percent.

The market will also weigh a looming congressional vote today on the furiously debated US$940 billion US healthcare reform bill.

“The health bill has been so widely discussed that it’s passage should not hurt the market,” Wells Fargo’s Goldman said.

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