WITH the broad S&P 500 Index gliding once again into uncharted territory and posting four straight weeks of gains, the talk of Wall Street’s rally inevitably hitting a ceiling is starting to get old.
Concerns about a technical correction have been a hot topic for weeks, especially as the rally accelerated in May – the S&P 500 is up 4.4 per cent so far this month and up nearly 17 per cent for the year. But as the three major US stock indexes inch higher and higher to set record after record, many analysts are shrugging off the pullback worries.
The S&P 500, which rose above the 1,600 level only two weeks ago, is now less than 40 points away from 1,700.
As the market continues its upward move, some market participants are beginning to believe that the rally is not a bubble but rather the start of a new bull market. Others argue, meanwhile, that the strong momentum is not based on fundamentals like economic data or corporate earnings but is relying heavily on easy monetary policy from global central banks.
Regardless, the consensus in the short term is that the market will avoid two of Wall Street’s most popular maxims – “sell in May and go away” and “summer doldrums” – and maintain the upward momentum.
With earnings season coming to a close, this week’s focus will be on the US Federal Reserve. Chairman Ben Bernanke will head up to Capitol Hill on Wednesday morning to testify on the economy before the Joint Economic Committee. The minutes from the Federal Open Market Committee’s most recent policymaking meeting will be released on Wednesday afternoon.
Preparations for the Memorial Day holiday on 27 May will probably cut trading short, and most market action is likely to be completed by mid-week.