The market’s wild moods continue, as bulls returned in force after being routed from the field the previous week. Stocks soared 3%, recovering all of the lost ground, on a rally fuelled by rising energy prices and robust U.S. economic data.

Oil rose 7% to $51.69 per barrel, and is up over 13% in the past two weeks. Although the European Central Bank took Greek bonds off its list of acceptable collateral, talks are ongoing about easing the country’s overwhelming debt problems. U.S. fourth-quarter earnings reports are meeting—albeit lowered—expectations.

What the state of global growth means to the Federal Reserve and when it will begin hiking interest rates—expected in midsummer—remain hotly contested. Action in 10-year U.S. Treasury notes suggests sooner rather than later, with the yields jumping 0.26, to 1.94%, the largest one-week increase since June 2013. (Bond prices move inversely to yields.)

Last week, the Dow Jones Industrial Average jumped 659 points, or 3.8%, to 17,824.29. The Standard & Poor’s 500 index tacked on 61, to 2055.47. The Nasdaq Composite rose 109, or 2.4%, to 4744.40.

Oil has become something of a Rorschach test for the global economy, says David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management. The market is interpreting the energy rebound as a positive indicator for world growth.

A “nice stable level of crude gives investors confidence,” adds Randy Frederick, managing director of trading and derivatives at Charles Schwab. “The jobs data was universally positive, too.”

The Labor Department said on Friday that the unemployment rate in January rose to 5.7% from 5.6% on higher participation, but the details below the headline, such as payrolls and wage growth, were strong.

The economy is in the sweet spot—“not too hot and not too cold,” Donabedian says. Quarterly earnings are coming in better than expected, and a high-profile merger doesn’t hurt, he adds. On Thursday, Pfizer (ticker: PFE) agreed to buy Hospira (HSP) for about $16 billion. It rose 34%, to 87.43.

If evidence were needed that 2015 was more volatile than 2014, Frederick points out the average daily swing in the S&P 500 index so far this year is 19 points, nearly 1%, compared with 12 points in the same period of 2014 and a 10-points average for all of 2014. Volatility gives traders opportunities but investors agita.

(Source: Barrons Online)

Stocks were spanked last week, falling nearly 3% amid low trading volumes. Ostensibly, investors were disappointed by data on U.S. economic growth, but the deeper issue is a nascent feeling that the worldwide quantitative easing (QE) cycle has reached the limits of encouraging growth.

This thinking is sustained by tumbling oil prices—which rose 6% last week to $48.24 per barrel but have fallen for seven consecutive months. Where once that plunge was welcome, investors now see it as a barometer of weak global gross-domestic-product (GDP) growth in 2014. The ongoing Greek drama over the country’s huge fiscal imbalances is also fueling uncertainty and keeping pressure on stock prices.

Friday, the Commerce Department said that U.S. GDP rose 2.6% last quarter, below expectations and far below the 4.6% to 5% seen in the previous two quarters. Strong fourth-quarter earnings reports from marquee names weren’t enough to keep spirits up.

The Dow Jones Industrial Average lost more than 500 points or 2.9% on the week, to 17,164.95. The Standard & Poor’s 500 index dropped 57, to 1994.99. The Nasdaq Composite gave up 123 points, or 2.5%, to 4635.24.

Jason DeSena Trennert, managing partner at Strategas Research Partners, says the long-term benefits of lower crude will outweigh the negatives. For consumers in the U.S. as well as some emerging-market countries like China and India, “It’s very positive,” he says.

Nevertheless, he adds, investors currently have a more jaundiced view of the drop, preferring to see it as a litmus test of global growth and as evidence of the limits of QE’s usefulness. (Central-bank QE policy moves support equities by depressing bond yields, making stocks more attractive.)

John Brady, a managing director at broker R.J. O’Brien, concurs, adding that in Europe the stimulative effect of the European Central Bank’s QE program remains an open question. The Continental bank system hasn’t recovered from the crisis as well as American banks, and the fiscal and political strife is rising, he says. That makes stocks “hard to price.” Volatility will stay elevated, if not get worse, he adds. DeSena Trennert adds that the QE anxiety and accompanying volatility will probably continue until oil prices stabilize.

There’s a “constant battle” among investors over whether to focus on macroeconomic factors or fundamental factors such as fourth-quarter earnings, says J.T. Cacciabaudo, director of institutional sales trading at Sterne, Agee & Leach. Last week saw strong quarterly profit from market leaders like Apple (ticker: AAPL) and Amazon.com (AMZN) but it wasn’t enough.

Despite the volatility, the market is where it was three months ago. “We haven’t gained or lost,” says Cacciabaudo, and the trading volume hasn’t been great. It feels worse, but the market has been running in place.

(Source: Barrons Online)