Stocks finished the week on a high note, up nearly 1%, helped by good quarterly results from some big industrials and more signs that the Federal Reserve mightn’t hike interest rates come December. Encouraging credit-market data from China also gave investors hope that the country’s growth might reignite.

Last week, the Dow rose 0.8%, or 132 points, to 17,215.97. The Standard & Poor’s 500 index increased 18, to 2033.11. The Nasdaq Composite moved up 1.2% last week to 4886.69.

The stock market has recovered much of the ground lost in the summer. Sentiment indicators, such as breadth, have improved significantly. That bodes well for the near term, but more volatility wouldn’t be surprising, says Liz Ann Sonders, chief investment strategist at Charles Schwab. She says a December rate hike is a toss-up.

The rally has been short and bracing, but it only returns the market to the narrow range that it has trudged in the last 12 months, notes Ralph Fogel, head of investments at Fogel Neale. The market sees the low U.S. economic growth and still-dropping unemployment figures as the “Goldilocks” scenario, he says. “The Fed won’t move in December…and maybe for a while longer,” he adds.

The U.S. bond market, which rallied strongly last week, is a tell, indicating there’s been a “further pushout” in market’s expectations for a Fed tightening, says Steven Einhorn, vice chairman of Omega Advisors.

The market recovered from midweek lows, caused by a surprisingly poor outlook from Wal-Mart Stores (ticker: WMT). The giant retailer, the biggest private employer in the U.S., said Wednesday that its earnings in 2016 would drop significantly, given its pledge to raise U.S. workers’ wages and invest in online sales.

Nevertheless, a continuation of mixed-to-sluggish U.S. data releases increasingly has investors believing the Fed won’t act this year. The bank’s beige-book survey, released Wednesday, indicated “continued modest expansion.”

Most of the market’s rally came Thursday, when many hedge funds began to cover short positions, says Michael O’Rourke, chief market strategist at JonesTrading.

Given that investors have returned to embracing the no-rate-hike idea, the Fed’s data and comments “spooked the shorts,” he adds.

Some surprisingly good news Friday from industrial bellwethers, such as General Electric (GE) and Honeywell International (HON), boosted stock market confidence, too. Both beat analyst third-quarter profit expectations.

Chinese September lending data were also stronger than expected, bolstering the idea that the government’s efforts to ramp up the country’s growth are taking hold. It shows there is credit-market support for Chinese expansion, and ultimately it should help the U.S., Einhorn adds.

(Source: Barrons Online)

The “risk on” trade is back. Stocks finished a torrid week with major indexes rising more than 3%. In a sign of improved investor confidence, riskier assets outperformed. Shares of small-caps and the most beaten-down companies rallied, as did emerging-market equities, up nearly 7%.

There’s enough global economic weakness for the Fed to delay an interest-rate hike, but investors came round to the conclusion that things are not quite as bad as they thought back in August, says Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management. Last week the Dow rose 3.7%, or 612 points, to 17,084.49. The Standard & Poor’s 500 index advanced 64, to 2014.89. The Nasdaq rose 2.6% on the week, to 4830.47. Stocks have risen eight out of the past nine trading sessions.

The expectation of no hike by the Federal Reserve Bank has weakened the dollar. The greenback is down from early August, which has bailed out some of the hardest-hit stock groups. Rising commodity prices, particularly oil, have also paced the market’s rebound and braced resource stocks. Crude rose 9% last week, its largest gain since August, and closed near $50 per barrel.

It’s no coincidence that the three best stock sectors since Sept. 18 have been energy, up 9%, and industrials and materials, both up 5%, the groups most pressured by higher commodity prices and a stronger dollar.

“The realization that a hike in December is a question mark, that the dollar has stopped going up, and that commodities have stopped going down” renewed interest in riskier assets, says Brian Belski, chief investment officer at BMO Financial Group. Many big investors were underexposed to resources, industrials, and financials, and those sectors took in some cash, he says.

(Source: Barrons Online)