The Markets This Week
THE WAY A BOXER MOVES AFTER RECEIVING a punishing punch often indicates the battle left in him. By that standard, the market still has a lot of fight left.
In a holiday-shortened week of seesaw trading, stocks managed a solid rise, despite the nasty surprise Friday that Chicago-area business activity deteriorated in May at a faster pace than the previous month, according to the Institute for Supply Management. The May Chicago Business Barometer, a closely watched benchmark, dropped to 34.9 from April's 40.1, lower than the 42 expected.
"I'm surprised by how well it took the weak Chicago data," says a chief market strategist for an institutional broker. Blows from a falling U.S. dollar, rising oil prices and a weak Treasury-bond market also weren't enough to drop stocks to the canvas last week.
The Dow Jones Industrial Average rose 223 points, or 2.7%, over the four-day week, to 8500.33. May marks the third straight monthly rise for the Dow, which has rallied 21%, the best three-month percentage gain since 1998.
Short covering helped move the market higher in recent months, but that fuel seems used up. Short-interest readings for the major indexes are at or near multiyear lows, except for the S&P 500, where most of the shorts are concentrated in a few stocks. But new life might come from the sidelines. "A lot of folks who have missed out on this rally will get back in during a pullback," says one Wall Street participant.
As noted last week, seasonal strength seems in place. The bulls are in control — for now — and it is probably going to take a nasty surprise to dethrone them (source: Barrons Online).
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