US INVESTORS’ eyes are this week on the Federal Reserve, which may provide a fillip to an otherwise dull summer market. Investors are leaning toward the view that the Fed will resort once more to some mild quantitative easing, which may be good or bad for the market.
“Bernanke himself has suggested extending the Bush tax cuts because, as he put it, the economy is still in need of stimulus. So it’s not completely out of reach that the Fed next week could actually implement the purchase of more mortgages or other assets. In other words, Quantitative Easing, Part 2,” said Frank Gretz, market analyst at Wellington Shields & Co in New York.
“This brings up a couple of interesting possibilities... Given that the Fed’s outlook is still for a moderate recovery, the market might not like that even the Fed has turned negative -- the seemingly good news of more easing could instead prove bad news.”
The Fed’s policy-making committee is due to meet on Tuesday.
The S&P 500 found enough bids after its intra-day sell-off to stage a late rally on Friday and closed above its 200-day moving average of 1,115, as it had done all week.
The benchmark’s moving average convergence-divergence is still showing a strong buy signal and the benchmark’s momentum is also positive.
But according to Vinny Catalano, global investment strategist with Blue Marble Research in New York, there are no clear signals of an upward or downward move and “right now we just got a short-term sideways trading range”.
Wall Street ended lower on Friday after a disappointing jobs report, but stocks erased most of their losses late. For the week, the Dow rose 1.8 per cent, the S&P 500 gained 1.8 per cent and the Nasdaq rose 1.5 per cent.
In corporate earnings, major retailers including Macy’s, JC Penney and Nordstrom are due to report this week.