US stocks enjoyed one of their best weeks of the year as investors grew more confident that dovish monetary policy would persist, overlooking concerns about earnings and slower economic growth.
The broad-based S&P 500 gained 63.53 points (3.26 percent) at 2,014.89, notching the biggest weekly gain since December last year.
The Dow Jones Industrial Average advanced 612.12 (3.72 percent) to 17,084.49, its best gain since February, while the tech-rich NASDAQ Composite Index rose 122.69 (2.61 percent) to 4,830.47.
Stocks kept their momentum from Friday last week, when markets rallied after a poor US jobs report was seen as dimming the prospects for a speedy US Federal Reserve interest rate hike.
“What’s happening is people are comfortable moving back into stocks because they see the Fed as out of the picture for the time being,” FTN Financial chief economist Chris Low said.
That view was only strengthened by Thursday’s minutes from the Fed’s Sept. 16 and Sept. 17 monetary policy meeting, when the central bank voted to delay a rate hike, citing worries about slowing global growth and its impact on the US economy.
“Recent global and financial market developments might restrain economic activity somewhat as a result of the higher level of the dollar and possible effects of slower economic growth in China and in a number of emerging-market and commodity-producing economies,” the minutes said.
On Tuesday, the IMF, warning of increasing risks from the slowdown in China, cut its global growth forecast to just 3.1 percent this year and 3.6 percent next year, each 0.2 percentage point lower than its July forecast.
Also of concern were early signs that third-quarter earnings will disappoint.
Analysts are expecting that earnings for S&P 500 companies will be 5.12 percent lower than in the year-ago period, according to S&P Capital IQ.
Alcoa Inc, traditionally an early reporter, said third-quarter profit fell 70.4 percent to US$44 million as the company trimmed its outlook for key Chinese businesses.
Agricultural seed giant Monsanto Co reported a quarterly loss of US$495 million and announced plans to cut 2,600 jobs, while fast-food company Yum Brands Inc, parent of the KFC and Taco Bell chains, lowered its earnings forecast due to sluggish sales in China.
Some analysts caution that the momentum that lifted the market this week could erode.
“The big concern remains on China and the emerging-market economies,” Ventura Wealth Management portfolio strategist Tom Cahill said. “To the extent the Fed is out of the way for now, these markets can stabilize, but there’s still a lot of concerns out there.”
Prominent activist investors drove other major announcements this week.
Mining company Freeport-McMoRan Inc rallied on news that it reached a deal with Carl Icahn to appoint two Icahn associates to the board and is considering spinning off its oil and gas business.
General Electric Co got a boost when activist investor Nelson Peltz’s Trian Fund Management took a 1 percent stake in the industrial conglomerate.
Peltz also figured into the surprise announcement that DuPont Co chief executive Ellen Kuhlman would resign, only months after turning back a Peltz campaign to win four board seats in the 213-year-old chemical company.
In other executive news, Twitter Inc gained momentum after announcing that interim chief and co-founder Jack Dorsey would stay on as chief executive.
Earnings season picks up considerably next week with reports from General Electric, Netflix Inc and JPMorgan Chase & Co and other large banks.
Key economic reports include last month’s US retail sales and the Fed’s Beige Book report of economic conditions.
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