Wall Street resumed its climb into uncharted territory on Wednesday, with the Dow setting another intra-day record as hiring by companies rose strongly last month.
The stock market rally this year has been helped by signs of a strengthening U.S. economy, continued support from the Federal Reserve and fairly attractive equity valuations compared with other assets.
U.S. stocks could struggle to extend their seven-week winning streak as the quarterly earnings period draws to a close and the market bumps into strong technical resistance.
Many analysts say the market could spend the next few weeks consolidating gains that have lifted the benchmark Standard & Poor’s 500 by 6.6 percent since the start of the year.
The S&P 500 ended 0.1 percent higher for the week, recovering from a late sell-off on Friday after a Bloomberg report about slow February sales at Wal-Mart triggered a slide in the retailer’s shares. It was the index’s seventh week of gains.
Odds of a pullback are increasing, with the market in slightly overbought territory, said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.
According to Knight Capital managing director Peter Kenny, concerns over Q4 earnings are wildly overdone. Not only that, he sees stocks moving up to 5% higher from here until the next round of debt ceiling debates start kicking in next month.
Kenny says Q4 earnings will not be as “ugly as many people are projecting.” Given that some of those people are corporate CEOs, the burden of proof for supporting this statement falls to Kenny. His bullish thesis stems from the following:
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Hope springs eternal among most stock strategists and Jeremy Zirin, chief equity strategist at UBS Wealth Management, is no exception. Zirin expects moderate gains in stocks this year and says the market will “continue to grind higher as the economy starts to improve.”
There are increasing signs that the economy is improving. The four-week moving average for initial unemployment claims has fallen to its lowest level since March 2008 and the housing market continues to gain momentum. Home prices and new home sales recently posted their biggest gains in 2.5 years and builder confidence has risen to its highest level in more than 6.5 years.
Zirin forecasts GDP growth of 2% to 2.5% this year. Growth will accelerate as Washington adopts new fiscal policies, says Zirin.
In 2012, investors’ long-harbored suspicion that the stock market was a rigged game became something of a majority opinion.
In 2012, investors’ long-harbored suspicion that the stock market was a rigged game became something of a majority opinion.
This year, exasperation over the predominantly electronic mechanics of trading stocks, in which hyper-fast computer algorithms maneuver against one another for fractions of pennies collected over microseconds, boiled over. The level of disgust has gotten broad enough, in fact, that authorities might be prepared to rethink some of the basic rules and processes driving the system.
The opaque and complex structure for trading stocks electronically across dozens of exchanges and alternative networks has long been justified by industry leaders and regulators as the messy but logical result of investor-friendly reforms. Technology has enabled mind-melting speed, unfathomable communications capacity and brutal competition for order flow – all of which have made trading cheaper and faster than ever.
U.S. stocks extended gains into a second session Tuesday, rising on signs of progress on Capitol Hill in reaching an accord to avoid steep spending cuts and tax increases next year.
“We’re seeing negotiations continue. Eventually they will come up with a deal, as I don’t think the sides are that far apart,” said David Kelly, chief market strategist at J.P. Morgan Funds.
Equities have risen on increased odds that the uncertainty presented by the so-called fiscal cliff would soon end, taking one of the risks to the economic forecast off the table, Kelly said.
BEIJING (Caixin Online) — One of China’s top government think tanks warns that the nation’s economic imbalance has worsened alarmingly with investment growth overshadowing consumption.
In a report published on Dec. 12, the China Academy of Social Sciences (CASS) said the structural imbalance in the country’s growth model, measured by its self-devised index, has significantly worsened over the past decade and more.
CASS is a ministry-level research institute that advises the State Council.
Its index gauges economic imbalance on a scale of 0 to 1. The higher the index, the worse the imbalance.
U.S. stocks look cheap relative to the “rich” bond market, but the cost of no “fiscal cliff” deal in Washington could send equities down three percent, Appaloosa Management Founder David Tepper told CNBC in an exclusive interview on Monday.
But putting things in perspective, the hedge fund titan Tepper said on “Squawk Box” that he doesn’t see “very much downside” in the stock market.
“This market is a very good market. And once we can get over this hump, we could have Prince,” he said, making reference to the Prince song “Party Like It’s 1999.” The Dow rose about 25 percent that year.
