Despite hiccups, hopes for the economy underpin stocks
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Lucky 7 eluded Wall Street’s blue-chip indexes today.
Despite a strong rally led by economy-sensitive stocks, the Dow Jones industrials and the Standard & Poor’s 500 closed shy of what was needed to extend their winning streak to seven weeks.
The Dow rose 119.23 points, or 1.5%, to 8,076.29, but was down 0.7% for the week. The S&P gained 1.7% to 866.23 but was off 0.4% for the week.
The BKX bank stock index slid 7.1% for the week, although it was up 2.9% today after the Federal Reserve’s initial report on big-bank ‘stress tests’ didn’t drop any bombs.
While financial stocks lost ground for the week, many market sectors did make it seven in a row, including the industrial, materials and technology sectors within the S&P 500. Those are bets that the economy will be getting better in the second half of the year -- the basic sentiment that has been a key force behind the spring rally.
Market bears say Wall Street is delusional (again), but investors remain inclined to look on the bright side of economic reports. Today, for example, the government reported a 0.8% drop in orders for big-ticket manufactured goods in March, but the decline was smaller than expected. Ditto for the 0.6% drop in new-home sales last month.
‘The market continues to treat good news well and shrugs off bad news,’ says Brent Luce, a portfolio manager at CapitalWorks in Cleveland.
And the problem for the bears is that they’re leaving a lot of money on the table by being unwilling to buy into the market even for a short-term trade. Case in point: Builder KB Home surged 99 cents, or 5.7%, to a six-month high of $18.38 today, bringing its year-to-date gain to 35%.
In the technology sector, Microsoft jumped $1.99 to $20.91 and Amazon.com rose $3.85 to $84.46 after their earnings reports late Thursday. Over the last two weeks, a number of major tech and e-commerce companies have reported first-quarter earnings that either matched expectations or beat them.
The Nasdaq composite index ended today at its highest level since Nov. 4, up 42.08 points, or 2.6%, to 1,694.29. The index rose 1.3% for the week and is up almost 34% since March 9.
Given the steep gains in stocks over the last seven weeks, many sidelined investors no doubt are waiting for a sharp pullback before getting in.
They had their chance on Monday, when the S&P 500 tumbled 4.3%. But ‘if you blinked, you may have missed it,’ analysts at Bespoke Investment Group noted in a report today. Buyers returned to the market on Tuesday, and again on Thursday and today.
Whatever it’s going to take to significantly curb investors’ renewed appetite for risk-taking, we haven’t seen it yet.
-- Tom Petruno