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)

Stocks finished more than 1% higher last week, but not before investors were treated to the market’s version of the Coney Island Cyclone, a ride equal parts thrilling and frightening. The scary nadir was reached Wednesday, when the two major broad indexes fell three-quarters of the way to a bear market, down about 15% from last May’s all- time highs.

On the week, the market dropped 4% before turning and soaring higher, finishing up better than 5% from the low. The violent moves were driven by similarly volatile oil prices, which hit a low Wednesday but finished up 9% on the week to $32.16 per barrel, up 21% from lows. Traders scrambled to cover their short positions.

Last week, the Dow Jones Industrial Average gained 105 points or 0.7%, to 16,093.51, and the Standard & Poor’s 500 index rose 27 to 1906.90. The Nasdaq picked up 2.3%, to 4591.18

Energy stocks jumped 2%. While the oil market ruled the day, equities also were boosted by comments about further stimulative central bank measures from officials in Europe and Japan last week. In the background, fears lurk about global growth, despite a decent 6.8% fourth quarter China GDP growth number released last week. Though a bit less than expected, it was much better than investors’ worst fears. Nevertheless, it was the lowest in a quarter century.

“There was a coiled spring of short positions” that were released in the upsurge, says Michael Purves, chief global strategist at Weeden. The oil bounce was particularly interesting as it occurred against a challenging backdrop of a rising dollar and news of rising U.S. crude supplies.

The oil rally is interesting from a historical view, as well. Two of the last three times crude prices closed up at least 9% on the week happened within the same week as a bottom in the stock market, in March 2009, and August 2015, according to WSJ Market Data Group.

Nevertheless, Adam Sarhan, CEO of Sarhan Capital, views last week’s recovery as just a relief rally from much oversold levels. Indeed, on Thursday, according to Bespoke Investment Group, the S&P 500 index had closed two standard deviations below its 50-day moving average for 11 straight days. Such a streak is rare, and the last one that long was October 2008, and before that September 2001.

Sarhan expects the broad stock indexes to enter a bear market and join many subgroups of stocks—commodity, small caps, banks, among others—already there. The market put in a “near term low” Wednesday, he says, but not “the low.”

Big violent rallies are par for the course in bear markets, not in bull markets, he adds. The market has not had a good time of it going right back to when the Federal Reserve ended its quantitative easing program in October 2014. The biggest driver of the bull was its easy monetary policy.

No moves are expected, but investors will be paying close attention this Tuesday and Wednesday, when the Federal Open Market Committee meets.

(Source: Barrons Online)