Stocks jumped Friday, turning an otherwise punk week into a winner. The major indexes rose about 2%, and investors cheered a surprise action by the Bank of Japan overnight Thursday to move its benchmark interest rate below zero.

With U.S. fourth-quarter gross-domestic-product numbers—out Friday morning—showing poor growth, 0.7% annualized, the BOJ move rescued a market worried that energy-sector carnage will hurt overall growth.

Crude oil, too, cooperated, up for a second consecutive week, 4.4% to $33.62 per barrel. A Federal Reserve statement Wednesday said it was watching “global economic and financial developments,” in a nod to market volatility over the past two months. However, the market was disappointed there were no indications it is backing away from the expected four rate hikes this year.

The Dow Jones Industrial Average gained 373 points, or 2.3%, to 16466.30 last week, while the Standard & Poor’s 500 index rose 33 to 1940.24. Both fell over 5% last month. The Nasdaq picked up 0.5%, to 4613.95, last week.

Some of the factors pressuring the market—weak oil prices and fear of a global growth slowdown—were temporarily relieved, says Peter Boockvar, chief market analyst at Lindsey Group. “The market continues to respond positively to any global easing,” he adds. The BOJ move was welcome given investors are fretting over whether the Fed will push back its rate-hike plan.

There will be diminishing returns to easing moves, however, predicts Boockvar, who notes many sectors and countries are already in a bear market, even if the  U.S. isn’t—yet. Bear markets—not bulls—are characterized by these sharp, violent moves upward, he adds.

Concern has grown that the oil-patch weakness of the past 18 months won’t stay confined to that sector and will eventually “leak into” and affect the wider economy, says Anwiti Bahuguna, a senior portfolio manager at Columbia Threadneedle Investments.

The equity rally could continue with more central bank action, she adds, but investors remain skittish. “If we don’t see better U.S. economic data, we haven’t seen the end of market weakness,” Bahuguna says.

Some investors might see two up weeks in a row as a turning point, but if that were true then why did defensive sectors—such as telecom, utilities, and consumer staples, up 3% to 4%—make up three of the top four sectors last week?

We are back to bad news is good again, something that’s characterized the market’s churning since midsummer. Since the top last May, with each new rally we’ve seen a cycle of lower highs, not a particularly encouraging sign.

(Source: Barrons Online)