By Chuck Mikolajczak
NEW YORK May 5 With Friday's U.S. payrolls
report serving as a springboard to lift Wall Street stock
indexes to new all-time highs, investors are left to contemplate
whether the gains will fizzle or if the upward momentum will
Investors cheered the jobs report on Friday, which showed
employment rose at a faster-than-anticipated pace in April and
hiring in the prior two months was much stronger than previously
The report eased investor concerns after a raft of soft
data, particularly in the manufacturing sector, and sent the S&P
500 hurtling past what was viewed as its final resistance level
of 1,600 to a fresh all-time closing high of 1,614.42.
With little in the way of economic data on tap this week and
earnings season moving into the home stretch, there appears to
be little that could derail a move higher.
"That's the $64,000 question - without a micro or macro
focus, what do we shift our attention to?" said Art Hogan,
managing director of Lazard Capital Markets in New York.
"I would argue in a lack of critical information this market
has found a path of least resistance to the upside."
The economic calendar for the coming week is extremely
light, with consumer credit and wholesale inventories for March
among the few notables.
Earnings season continues its wind down, with Walt Disney Co
the only Dow component scheduled to report for the week.
Its results could also provide a glimpse into the health of
Other notable S&P 500 companies expected to post earnings
include Tyson Foods Inc, Dean Foods Co,
Electronic Arts Inc, Whole Foods Market, Nvidia
Corp and Priceline.com.
Corporate earnings have improved from earlier market
expectations, with the expected earnings growth now at 5.2
percent, up from 1.5 percent at the start of earnings season.
According to Thomson Reuters data through Friday, of the 404
companies in the benchmark 500 index that have reported
earnings, 68.3 percent have topped analyst expectations, above
the 63 percent average since 1994 and the 67 percent average for
the past four quarters.
But revenue remains disappointing, with only 46.3 percent of
S&P 500 companies topping Wall Street expectations, well below
the 62 percent beat rate since 2002 and shy of the 52 percent
average for the past four quarters.
With the S&P easily breezing past what was seen as its final
resistance point of 1,600, the index is now in uncharted waters
for investors to try and predict when a pullback may occur or
gains may slow.
"(The S&P 500) broke through that 1,600-resistance level
like it wasn't even there based on the payrolls report," said
Paul Mendelsohn, chief investment strategist at Windham
Financial Services in Charlotte, Vermont.
"Generally you don't want to fight a 52-week high, you
definitely don't want to fight an all-time high."
For the week, the Dow rose 1.8 percent, the S&P 500 gained 2
percent, and the Nasdaq advanced 3 percent.
With the gains on Friday, the S&P 500 put together its first
consecutive weekly advances since a seven-week run that ended in
mid-March, a possible sign of continued trends higher. Markets
are heading into the traditionally weaker summer months. The
index has fallen in May for the past three years.
"The key now is, you want to see the bulls continue to push
higher, you don't want to see the slip back," said Ryan Detrick,
a senior technical strategist at Schaeffer's Investment Research
in Cincinnati, Ohio.
"The ultimate contrarian would say a lot of that very well
could be priced in, the thing most people aren't expecting is a
continued rally in the normally weak summer months," he said.
By the same token, the lofty levels for equities could make
them ripe for a pullback, with investors resuming the battle
between booking profits and buying dips. That battle caused the
index to alternate between weekly gains and losses throughout
the latter portion of March and most of April.
"It is a bipolar market. It is either all on or all off,"
Mendelsohn said. "Either things are great and we are going to
the moon, or everything is falling apart and it's all over."
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