NEW YORK, April 21: Surging share prices on Wall Street over the past week have put the 13,000 level in sight for the Dow blue-chip index even though some analysts see momentum fading.
The latest rally has been fueled by stronger-than-expected profits for top US firms and hints that inflation is easing, but a slew of more corporate results in the coming week and a reading on US economic growth will put momentum to the test again, analysts say.
The Dow Jones Industrial Average of blue chips rode a seven-session winning streak to close Friday at an all-time high of 12,961.98, with a weekly gain of 2.77 per cent.
The broad-market Standard & Poor's 500 index meanwhile rallied 2.17 per cent to end the week at a six-and-a-half-year record of 1,484.35, edging closer to its all-time high of 1,527.46 in March 2000.
The tech-heavy Nasdaq composite advanced 1.38 per cent for the week to 2,526.39.
The gains over the past week were inspired by surprisingly stronger earnings than people had been expecting,” said Owen Fitzpatrick, market analyst at Deutsche Bank.
A blowout billion-dollar quarterly profit from Google, and robust results from Bank of America, Coca-Cola and JPMorgan Chase helped offset disappointments from a few including Yahoo.
Significantly, the market reaction was positive to the latest consumer inflation data.
Although US consumer prices rose a strong 0.6pc in March as energy costs shot higher, the “core” inflation level seen as an important forward-looking gauge showed a modest 0.1pc rise.
If the trend holds, analysts said it could induce the Federal Reserve to cut interest rates later this year, which would stimulate economic and profit growth.
Inflation risks are fading, said Stephen Gallagher, economist at Societe Generale in New York.
It appears that the benign core CPI was sufficient to ease inflation concerns in the market, he said.
Brian Bethune and Nigel Gault at the research firm Global Insight said the past week's market action came in response to good earnings reports, better news on the economy and quiescent core consumer price inflation.They said in a note to clients that earnings were boosted by solid export demand and currency gains from a weak US dollar but that this will be a tough act to follow next week with data expected to reinforce the picture of a wounded housing market and a winded economy. The analysts said they expect US gross domestic product (GDP) for the first quarter to show an adavnce of just 1.3 per cent.
The market is hitting new highs, but is doing so in an unconvincing fashion, Dickey said. The relatively low volume is less than what would be desired at new highs. Dickey said he sees the Dow moving as high as 13,200 before some consolidation begins, and then perhaps another leg up.—AFP