Wall Street enters this month with momentum from a late-summer rally but with investors cautious about what is traditionally the cruelest month for the stock market.
The market is also anxiously watching whether the US economy achieves its hoped-for "soft landing" without faltering, and without a need for additional rate increases by the Federal Reserve.
The blue-chip Dow Jones Industrial Average climbed 1.6 percent in the week to Friday to 11,464.15 and the tech-laden NASDAQ composite surged 2.5 percent to 2,193.16.
The broad-market Standard and Poor's 500 advanced 1.2 percent on the week to 1,311.01, as the market prepared to pause for the Labor Day holiday weekend. US markets are closed tomorrow.
The market's positive performance came as economic reports appeared to show the US economy cooling to a moderate pace that could allow the Federal Reserve to avoid further rate hikes.
US gross domestic product for the second quarter was revised up to show a 2.9 percent annual growth rate and another report showed US employers added 128,000 new jobs last month.
Those reports were consistent with the so-called "Goldilocks" scenario -- not too hot, not too cold -- that Wall Street likes.
"The numbers say that the economy is slowing to a sustainable pace and the rate of inflation will come down. That's exactly what the Federal Reserve wanted," said Hugh Johnson at Johnson Illington Advisors. "The best guess is that the stock market will continue the trend set this week. I don't see anything coming next week that will derail the modest move to the upside."
Yet some analysts are cautious about the seasonal trend, with September seen as the worst month for the stock market, averaging a loss of some 1.5 percent since 1980.
After a strong month last month that saw the broad market up 2.1 percent and the NASDAQ gaining 4.4 percent, it remains unclear whether Wall Street can keep its momentum.
Marc Pado, analyst at Cantor Fitzgerald, said the summer season is unusual because trading is lighter than usual.
"This light volume rally does have many people a little bit concerned," he said.
"The day after Labor Day traditionally marks the beginning of a new investment season for traders and professional investors," said Fred Dickson, market strategist at DA Davidson. "Institutional conferences accelerate and investors refocus on earnings estimates. September is traditionally a treacherous month for investors."
Dickson said he anticipates some turbulence this month but argues that the long-term outlook remains favorable.
"We still believe the market climate will improve as we leave September and move into the fourth quarter," he said.
Others say the economy and the stock market are not out of the woods yet. A sharp downturn in the housing market still has the potential to weigh on US consumers.
"Housing appears to have been an investment bubble, at least in hot locations, and is now deflating," said Donald Ratajczak, economist and consultant to Morgan Keegan. "The big fear is that the growing consumer stress observed in their ballooning credit debt will begin to shut down spending."
But Philip Orlando at Federated Investments said stocks remain attractive after hovering in a narrow range for a long period, and that now may be a good time to buy.
He said that the Fed campaign of rate hikes appears to be over, and that "the end of rate hikes often is good for stocks."
Additionally, he noted that "stocks are much more attractively valued today than they were at the peak of the tech bubble in 2000."
Bond prices firmed over the past week. The yield on the 10-year Treasury bond dropped to 4.726 percent from 4.791 percent a week earlier, while that on the 30-year bond fell to 4.873 percent from 4.932 percent. Bond yields and prices move in opposite directions.
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