The Markets This Week
STOCKS RALLIED FOR — GASP — A FOURTH straight week, bringing fresh hurt to the thwarted but unrepentant majority who believes we're in the midst of a mere bear-market bounce. But a reprieve might not be far off.
A little reflection is in order with stocks 25% above their March 9 lows: Have economic prospects brightened so much in just 19 days? The question, while legitimate, was brushed aside by a market more preoccupied lately with tomorrow's promise than today's problems.
Stocks' longest advancing streak of this bear market isn't without drivers: World leaders huddling in London pledged another $1.1 trillion to stimulate the global economy. The U.S. government relaxed accounting rules that required banks to mark assets according to market value, which will make their books more opaque but will at least help banks reduce their write-downs.
Still, strength of any rally is measured not just by how far stocks surge, but how they absorb the setbacks, and so far the market's willingness to accentuate the positive is remarkable. General Motors (ticker: GM) steering toward bankruptcy? Treated like old news by a market already looking ahead to restructuring and recovery. Employers laying off another 663,000 in March to send the unemployment rate to a 25-year high of 8.5%? Stocks greeted that news with a rally on Friday.
According to historical script, stocks reach a bottom four or five months before a recession ends, and corporate profits turn higher four or five months after. This gives the U.S. economy an August deadline for shaping up — if March 9 is to remain the low point for this bear market. In the coming weeks, the market's direction will depend on the extent to which this assumption is supported or refuted by economic data and, starting Tuesday, earnings reports (source: Barrons Online).
Comments