Wall Street will keep a close eye on a key Federal Reserve policy meeting the coming week amid concerns the US economic recovery could stall following larger-than-expected job losses.
US shares ended the week higher despite a market-jolting report on Friday showing the economy shed more jobs than expected last month.
Investors were concerned that economic growth, which resumed in the middle of last year after a brutal recession, could be derailed as unemployment remained at a high rate of 9.5 percent and as Americans keep their wallets tightly shut.
With interest rates at virtually 0 percent, analysts suggested the Federal Reserve rate-setting body’s meeting on Tuesday could consider other monetary policy-based stimulus measures.
It includes action by the central bank to directly pump money into the economy again, like it did at the height of the financial crisis.
“Investors may be anticipating an extension or expansion of the Fed’s policy of quantitative easing, or massive purchases of Treasuries and other securities to provide further liquidity to the economy,” analyst Frederic Dickson at D.A. Davidson & Co said.
“The rumors of quantitative easing have been a good part of the recent rally in stocks, so if the data continue to come in relatively benign, and the Fed does nothing, it’s hard to say that this rally will be sustained,” Wells Fargo analyst Gina Martin said.
Despite persistent economic concerns, the Dow ended the week 1.8 percent higher on Friday at 10,653.56, the first time the blue-chip index closed above the 10,600 level since May 14.
The tech-rich NASDAQ composite index was up 1.5 percent over the week at 2,288.47, while the broader S&P 500 index jumped 1.8 percent at 1,121.64.
Aside from better-than-expected company earnings, investors were buoyed by data earlier in the week showing activity in the manufacturing and service sectors continuing to expand even as economic growth rates slowed this year.
The markets are also expecting actions by US President Barack Obama’s administration to spur jobs and growth ahead of November midterm elections that could see his Democratic party lose control of Congress.
“With the midterm elections rapidly approaching, Congress and the Obama administration simply do not have the luxury of patience with regard to the sluggish pace of job creation,” analyst Philip Orlando at Federated Investors said.
If the next monthly jobs report to be released next month does not begin to show stark improvement in the labor market, then Washington needs to come back “with their fiscal guns blazing and orchestrate an across-the-board tax cut for all consumers and businesses for at least the next two years,” he said.
During the upcoming week, the markets are expected to hear economic news that have a more positive spin overall, analysts at IHS Global Insight said.
For example, a government retail sales report for last month could show sales modestly higher, they said.
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