NEW YORK, May 17: Wall Street is clawing its way back from a dismal start to the year as confidence grows about the prospects of a US economic recovery without a calamitous downturn.

The past week saw solid gains for the main indexes, as the Dow Jones Industrial Average climbed 1.9 per cent to finish Friday at 12,986.80.

The Standard & Poor’s 500 broad-market rallied 2.7 per cent to 1,425.35 while the tech-dominated Nasdaq composite vaulted 3.4 per cent for the week to 2,528.85.

The Dow blue-chip index is now lower by just 2.1 per cent for the year, having recouped most losses from the first quarter. The S&P is down 2.9 per cent and the Nasdaq off 4.6 per cent.

We remain impressed by stock market action, said Al Goldman, chief market strategist at Wachovia Securities.

Bad news is no longer killing the market, and bits of good news are well received, he added.

Sooner or later investors realize that the economy will eventually turn back up and the current supposed ‘insurmountable problems’ will be surmounted.

This is called ‘looking beyond the valley to the peaks ahead,’ and that’s the market phase we continue to believe we are in. Economic data remain mixed.

US homebuilding showed a surprisingly strong jump in April, with starts rising 8.2 per cent in April from March to an annual rate of 1.032 million units.

Inflation data showed prices generally in check, but consumer confidence fell further, suggesting spending may remain weak despite a massive tax rebate program as part of the government’s 168-billion-dollar economic stimulus.

Linda Deussel at Federated Investors said the US economy appears to have weathered the housing and credit crisis, which would be positive for stocks.

If we’re right, and the worst of the credit crisis is behind us, we think the key issue is the nature of the current economic slowdown, and the potential for leakage into non-financial sectors, she said.

She said the US economy “will skirt recession,” as a result of aggressive Federal Reserve interest-rate cuts and more than 100 billion dollars in tax rebates.

We’re no longer near the abyss, as systemic risk appears to have abated,she said.

The 0.2 per cent drop in retail sales likely reflects tighter consumer lending and higher fuel prices that in coming months may spill over into other expenditure categories, Hanson said.

Hanson added that the tax rebates will provide only a temporary boost to spending, mainly in the third quarter.—AFP