Business

Monday September 14, 2009

Big mood shift seen in year after Lehman

By ELLIS MNYANDU


NEW YORK: US stocks are poised to repeat their advance this week as investors bet that the economic recovery is gaining strength and company outlooks are turning rosier.

Despite the upcoming anniversary of Lehman Brothers Holdings’ collapse and the tumult that subsequently rocked Wall Street a year ago, the mood in the market is likely to be more optimistic than gloomy.

A year ago, it seemed as if the financial world was coming to an end when Lehman, a 158-year-old trading company and parent of what had been the fourth largest US investment bank, filed for bankruptcy on Sept 15, setting off a scramble by authorities to avert a global financial meltdown.

But fast forward to September 2009, US stocks are at fresh 12-month highs, and if this week’s economic reports show the recession continues to abate, US stocks should extend their run-up.

“The market is still in the process of pricing in an economic recovery,” said Sean Clark, chief investment officer at Philadelphia-based Clark Capital Management. “We think we’re going to see 3% economic growth in the second half of this year. As we look out into the future, I think third-quarter earnings are going to be better than expected and, based on improving economic conditions, we’ll start seeing top-line growth.”

Indeed, in recent days there have been increasing signs that corporate profits are improving after FedEx Corp and Procter & Gamble joined other bellwethers in giving upbeat financial outlooks. There could yet be more companies this week that offer welcome news in their outlooks.

“The earnings pre-announcements are going to be important because to sustain any move beyond where we are, we have to have pretty decent earnings growth in 2010,” said Gail Dudack, chief investment strategist at Dudack Research Group in New York.

On the economic front, August retail sales, due tomorrow, along with the producer price index and a reading on July business inventories, will command attention. Data on New York state manufacturing is also due tomorrow.

A Reuters poll of economists expects retail sales to show a gain of 2% after a drop of 0.1% in July. Excluding motor vehicles, the sales are projected to be up 0.4%, compared with a dip of 0.6% in the prior month.

“You will get a boost to retail sales from the autos side, but we will be looking at the underlying trend of sales without autos,” said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey. “If there’s any improvement, that should give a gauge of recovery in consumer spending.”

Data on the consumer price index and industrial production in August are due on Wednesday.

Releases on August housing starts, a weekly report on initial jobless claims and a survey of factory activity in the US mid-Atlantic region are scheduled on Thursday.

The data will be sifted for evidence that the economic recovery is gaining traction. Hopes for an economic rebound have helped the benchmark S&P 500 index rally 54% since hitting a 12-month closing low on March 9.

Stellar sectors in that rally have included transportation, industrials, materials and technology.

On Friday, the S&P 500 ended slightly lower on profit-taking and a retreat by crude prices, which hurt energy shares. But for the week, the S&P rose 2.6%, while the Dow Jones Industrial Average added 1.7% and the Nasdaq climbed 3.1%.

US President Barack Obama is scheduled to speak in New York today on financial reforms and the need to strengthen the system to avoid another economic collapse.

Federal Reserve chairman Ben S. Bernanke will talk about “Reflections on A Year of Crisis” in Washington tomorrow. — Reuters


Latest business news from AP-Wire

  • E-mail this story
  • Print this story