Wall Street trading looks set to remain in low gear in the week ahead as investors increasingly expect the US government to pump cash into the markets to boost the lagging economy.
The week was marked by apprehension ahead of Friday’s key monthly unemployment report, but even after it showed the economy shed more jobs than expected last month, stocks remained stable to close the week with gains.
“It is interesting that we’re celebrating the fact that the Federal Reserve feels that the economic conditions warrant more monetary policy,” Jefferies analyst Art Hogan said.
For the week, the Dow Jones Industrial Average was up 1.75 percent to 11,006.48 points, its highest level since early May.
The broader S&P 500 index rose 1.65 percent to 1,165.15 points, while the technology-rich NASDAQ composite index gained 31.16 points to finish the week at 2,401.91, a 1.3 percent gain.
In its keenly awaited report, the US Labor Department said the economy lost a higher-than--expected 95,000 non-farm jobs last month while the unemployment rate held unchanged at 9.6 percent from August. Government payrolls fell by a larger-than-expected 159,000, while private-sector payroll employment rose by 64,000, below expectations.
Most analysts agree that the overall weak report left the US Federal Reserve with little choice but to step in to prop up the economy after it said last month it was prepared to intervene, with the only question being when.
“This past week’s data ended with a thud. After the disappointing September employment report, we now expect the Federal Reserve to resume large-scale asset purchases in November rather than December,” Aaron Smith of Moody’s Economy.com said.
“Until confidence is restored, the recovery will likely remain stuck in neutral as businesses remain hesitant to hire and invest,” he said.
The Federal Reserve has bought about US$1.5 trillion in Treasury bonds and assets to boost a recovery from the worst recession in decades.
The week ahead has a heavy economic calendar, led by the release tomorrow of the minutes of the Sept. 21 meeting of the central bank’s Federal Open Market Committee, which could provide further insight into policymakers’ thinking on new stimulus measures.
More data includes the US trade deficit on Wednesday and retail sales numbers on Thursday as well as a slew of quarterly earnings reports from big corporates including Intel, Google, JPMorgan Chase and General Electric.
However, the data is unlikely to heavily sway the market as traders remain cautious ahead of the anticipated government intervention.
“Let’s face it, money is going to get pushed into equities ... I don’t see anything that can derail the market,” Mace Blicksilver of Marblehead Asset Management said.
The anticipation of further quantitative easing has also taken a heavy toll on the US dollar, which has hit new lows against key currencies in recent weeks, raising heavy global concerns.
The dollar’s decline coincides with increasing fears of an international currency war as nations from Japan to Colombia have already intervened to stop their currencies from rising and as China faces mounting international pressure to allow its currency to appreciate.
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