Stocks al­most erase 2016 losses as bulls charge

The Pak Banker - - MARKETS/SPORTS -

The bulls have gained the up­per hand in the U.S. stock mar­ket in re­cent weeks and strate­gists are cau­tiously op­ti­mistic the re­bound will con­tinue.

A lot is rid­ing on whether eco­nomic data can con­tinue to hold up, since up­beat re­ports in re­cent weeks have eased fears the United States may be headed for a re­ces­sion.

Fri­day's jobs re­port was the lat­est sig­nal that those wor­ries were overblown, with Fe­bru­ary U.S. pay­rolls surg­ing more than ex­pected.

The S&P 500 has gained in 10 out of 15 ses­sions since its Feb. 11 low, and on Fri­day closed above its 100-day mov­ing av­er­age for first time in 2016. Half of 10 S&P sec­tors - in­clud­ing en­ergy, which had been se­verely beaten down - are now pos­i­tive for the year.

In an­other up­beat sign for the mar­ket, the Dow Jones trans­porta­tion av­er­age .DJT has been out­per­form­ing the broader mar­ket. It is up 1.9 per­cent since Dec. 31, largely be­cause of the re­cent gains in oil prices, while the S&P 500 is down 2.2 per­cent. "If you were pric­ing this thing for a re­ces­sion, you've got to take it back out," said Jim Paulsen, chief in­vest­ment of­fi­cer at Wells Cap­i­tal Man­age­ment in Min­neapo­lis. He added that the S&P 500 could test its high from May 2015, when it closed at a record 2,130.82.

He and oth­ers are ex­pect­ing data to con­tinue to sup­port the view that the United States will avoid a re­ces­sion, though they said plenty could still de­rail the mar­ket. For one, while stock in­vestors cheered Fri­day's pay­rolls, in­vestors worry more up­beat data will bol­ster prospects for a rate hike from the Fed­eral Re­serve this year.

In­vestors see the Fed as hold­ing off on rate hikes for now, help­ing stocks in re­cent weeks, said Don­ald Selkin, chief mar­ket strate­gist at Na­tional Se­cu­ri­ties in New York.

A ma­jor­ity of Wall Street's top banks ex­pect the Fed to raise in­ter­est rates only two more times by the end of the year, a down­grade of ear­lier ex­pec­ta­tions, ac­cord­ing to a Reuters poll on Fri­day.

The eco­nomic, Fed and earn­ings cal­en­dars are light next week. Oil prices are likely to keep their dom­i­nant role.

"You don't want oil prices to go back below $30," Selkin said.

The en­ergy in­dex .SPNY, which was the worst-per­form­ing sec­tor of 2015, is now up more than 20 per­cent from the Jan. 20 bot­tom.

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