Stock markets on a roll amid raft of positive reports

Maybe it’s because the U.S. economy is doing better than expected.

Maybe it’s because the debt-ridden European Union hasn’t imploded — at least not yet.

Or perhaps it’s because China’s economy has sidestepped the kind of ugly crash landing many western analysts have been predicting — incorrectly — for years.

I don’t have the answer, that’s for sure. But one thing is clear: The bulls are back in charge, and stock markets are again on a roll.

All of which explains why Facebook founder Mark Zuckerberg has chosen this particular moment to launch his social networking firm’s muchhyped $5-billion US IPO (initial public offering).

You don’t get to be a billionaire at age 27 if you don’t have the good sense to strike while the iron is hot, and that’s precisely what Zuckerberg is doing by offering the hoi polloi a piece of the magic kingdom.

Whether the IPO proves to be a good deal for retail investors remains to be seen, but insiders who bought pre-ipo shares are sure to reap windfall profits, regardless.

While market players were buzzing over Facebook’s IPO, Wednesday’s rally in North American stock markets left the major U.S. indexes within spitting distance of their 52week highs.

At 12,716.46, the Dow Jones Industrial Average is just 160 points shy of its 2011 high, and the S&P 500 Index, at 1,324.09, has fewer than 50 points to go.

It’s the same story for the techladen Nasdaq Composite Index. It closed Wednesday at 2,848.27, a mere 40 points south of its 52-week high.

Since bottoming out in October, the major U.S. indexes are all up by well over 20 per cent.

Although Canada’s lead equity benchmark still has a long way to go to match its 2011 high of 14,329, it too has been on a rocket ride of late.

Since it touched its 2011 low in October, the S&P/TSX Composite Index has gained a tidy 15.4 per cent, closing Wednesday at 12,517.66.

Stocks jumped Wednesday after data showed the U.S. manufacturing sector grew at the fastest pace in seven months.

Factory data in China and Europe also posted gains, and Greece appeared to be making progress in the latest round of never-ending debt restructuring talks.

“The news on the economy is better,” portfolio manager David Sowerby of Loomis Sayles told Bloomberg. “The uncertainty in Europe has diminished. While corporate profits have been less robust, they are still growing. That’s what’s moving stock prices higher.”

Maybe so. But investor sentiment has also undergone a seismic shift since October. Suddenly, stocks that struggled for years — such as General Electric, Intel and Microsoft — are showing some life, and that’s luring skittish investors back into the market.

Indeed, the 4.4 per cent uptick last month in the broadly based S&P 500 Index marked the strongest January in 15 years.

And while the number of U.S. cor- porations that beat analysts’ earnings estimates is lower than in previous quarters, results are still strong. Two-thirds of all U.S. companies that reported quarterly results to date have topped estimates, Bloomberg reports.

As a result, some bearish forecasters have been forced to wave the white flag and turn bullish, adding further momentum to the recent rally. Just weeks after he advised investors to “remain cautious,” Larry Hatheway, chief economist at UBS AG, turned bullish, Bloomberg reports. Other market gurus have also warmed up to stocks.

“In hindsight, everybody was so beared up at the end of last year. There was nowhere to go but up,” Mary Ann Bartels, head of technical and market analysis at Bank of America, told Bloomberg.

In late December, Bartels predicted the S&P 500 would likely fall about 15 per cent in the first half of 2012, before recovering. (Oops)

In Toronto, where mining and energy stocks are a much bigger part of the market, stronger prices for gold and base metals and continued strength in oil prices have driven the market higher.

“Sentiment has improved in early 2012, with some investment and hedge funds shifting from short to long positions in base metals,” notes Patricia Mohr, Scotiabank’s commodity guru, in a report Tuesday.

“U.S. economic indicators have edged up (with stronger U.S. auto sales and assemblies and orders for manufacturers), lifting prices for industrial raw materials such as steel and base metals,” she adds.

And while China has only moderately eased its monetary policy to date, “hedge funds are beginning to anticipate a return to pro-growth policies and are now more inclined to believe in a soft landing” instead of a crash, she adds.

Further, Mohr says prices for gold, copper and other industrial metals have been lifted by the Federal Reserve Board’s recent announcement that U.S. interest rates will likely remain low through 2014.

John Ing, president of Maison Placements Canada, recently predicted that gold prices will reach $3,000 US an ounce in 2012. The price of the yellow metal has jumped about $200 an ounce since late December and is now within $175 of its September high of $1,920.

At the same time, a more bullish outlook for the North American auto sector in 2012 has helped drive up prices for auto parts stocks.

With so much good news breaking out on so many fronts, however, some market pros say a pullback can’t be far off.