The Dow Jones finished on Saturday, our time, with the strongest spike in the index since 2000. It smashed through the 9000-level and is up around 39 per cent since 6 March, but only 3.6 per cent for the calendar year. The S&P 500 is up 8.4 per cent.
The Nasdaq has put on 24.7 per cent!
Why? This tech-laden index has lots of companies that have big overseas exposure and are not just US-economy dependent. Lots of these companies sell to China, India and Australia — economies where the GFC has not hit as hard as the USA.
In a surprise, the Microsoft and Amazon earnings stories disappointed the market late last week. Microsoft shares lost 8.3 per cent while Amazon dropped 7.9 per cent.
On the other hand, American Express came in better than expectations but its revenue was under forecasts. But, as they say, “it’s all good.”
In another surprise the Reuters/University of Michigan consumer sentiment number dropped from 70.8 last month to 66, but as I say, “it’s all good.”
In genuinely good reports, Black and Decker projected a positive outlook and its shares went up a big 10 per cent. CNBC pointed out ten out of ten important S&P sectors were higher, with materials the trailblazer, rising eight per cent. “Energy and utilities rounded out the top three as oil gained more than five per cent to settle at US$68.05 a barrel. Consumer staples were the worst performer, along with financials and technology,” the report revealed.
A star performer was Caterpillar rising close to 24 percent, but all the stars align for this company. It’s an exporter selling to the likes of China and every government in the world, including ours, and is committed to spending on infrastructure.
One notable change in attitude from those who expected a significant sell off is that they still expect a pullback but think the market will go higher.
Art Cashin, the director of floor operations at UBS Financial Services, who regularly talks to CNBC is in this group.
"The problem is, we're overbought now and we'll probably have a pullback — next week, I think," he said.
"[Dow] 10,000 is not out of the realm of possibility. A little above 1,000 for the S&P," he added. "The rally is going to continue."
But he thinks in a month or so from now, we could wake up to see a sudden reversal.
Ahead this week the Yanks have new-home sales, the Case-Shiller home-price index, consumer confidence, durable goods, Chicago PMI and GDP. There will also be a swag of company earnings.
So the big question remains: Can the rally continue? I have one thing to say — “it’s all good!”
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