US stocks jumped to fresh records this week as the US Federal Reserve’s promise of continued low interest rates offset turmoil in Iraq that lifted oil prices.
The tech-heavy NASDAQ Composite Index advanced 57.39 points (1.33 percent) to close on 4,368.04, while the Dow Jones Industrial Average jumped 171.34 (1.02 percent) to 16,947.08 and the S&P 500 shot up 26.71 (1.38 percent) to 1,962.87.
Both the Dow and the S&P stood at records at week’s end.
Equities were in positive territory most of the week, but the strongest gains came on Wednesday after Fed Chair Janet Yellen downplayed higher inflation numbers and signaled that benchmark interest rates would remain low through next year.
“What’s driving the market now is central bankers,” Cornerstone Wealth Management chief investment officer Alan Skrainka said, adding that he thinks Yellen was too dovish. “I really feel the Federal Reserve should be a little less accommodative and send a message that they’re not going to be caught behind the curve when it ultimately becomes time to raise rates.”
While Skrainka still believes the US economy is strengthening, he said the country’s stock market at this point is “fully valued,” warning that a correction could come in the short term in the even of another surprise negative event such as the sudden eruption of fighting in Iraq.
Wunderlich Securities chief market strategist Art Hogan gave a more bullish outlook on stocks and praised the Fed’s tone, but agreed that Iraq remains a wild card.
“I think the market has grown tolerant of the near-term story, but it wouldn’t take much of an escalation of violence and/or a movement closer to a disruption of energy or oil to change that narrative,” Hogan said. “So it’s very tenuous still.”
Besides easy liquidity from the Fed and generally improving economic data, US stocks have benefited from a steady stream of corporate deals his year.
Major deals during the week included US medical device maker Medtronic Inc’s plan to buy its Irish-based competitor Covidien Ltd for US$42.9 billion, and US telecom operator Level 3 Communications Inc’s takeover of TW Telecom Inc in a deal worth US$7.3 billion.
On Friday, General Electric Co’s proposal to buy the energy assets of French industrial heavyweight Alstom SA for US$16.8 billion received a key boost when the French government endorsed the deal over a competing offer from Germany’s Siemens AG and Japan’s Mitsubishi Heavy Industries Ltd.
As part of the deal, France plans to take a dominant 20 percent stake in Alstom by buying two-thirds of the shares owned by French group Bouygues SA.
Ireland’s Shire PLC on Friday rejected a US$46 billion informal bid from US giant AbbVie Inc, saying the proposal “fundamentally undervalued” the company and criticizing AbbVie’s plan to relocate its headquarters in Britain for tax purposes.
Next week’s calendar includes releases on durable goods orders for last month, the US Conference Board’s Consumer Confidence Index and several important housing indicators, including new home sales, existing home sales and the Case-Shiller Home Price Index.
The agenda also includes earnings reports from agricultural giant Monsanto Co and Dow component Nike Inc.
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