New York: US stocks ended the week on a sour note after top firm Goldman Sachs was charged with fraud but analysts see a buoyant Wall Street amid positive outlook for the technology and financial sectors.
The Dow Jones Industrial Average breached the psychological 11,000 point level for the first time in 18 months and closed Friday at 11,018.66, eking out a slim gain of 0.2% for the week.
The tech-rich Nasdaq posted a weekly gain of 1.1% to 2,481.26 while the broad-market Standard & Poor’s 500 slipped 0.2% to end the week at 1,192.13.
Financial stocks led a broad selloff Friday after Goldman was sued by the Securities and Exchange Commission (SEC) for fraud related to mortgage securities, ending six consecutive sessions of gains on Wall Street.
Still, analysts said the market had not lost its upward momentum with bouts of healthy profit taking.
“The big question is whether this is the beginning of a normal pause-to-refresh or just a little churn before going higher,” said Wells Fargo Advisors chief market strategist Al Goldman.
“Well, bull markets give ground begrudgingly and this bull is surely following that pattern,” he said.
With key companies such as chipmaker Intel and JPMorgan Chase both posting profits that easily exceeded expectations, analysts at Charles Schwab & Co said the technology sector could continue to help pace the recovery while the financial sector might be set to contribute more to the economic prosperity.
“The trend in the economy has shown continued improvement, and investors are looking to earnings reports for further moves in the market, trying to discern whether earnings will be strong enough,” they said in a client note.
Analysts expect economic indicators the coming week, such as producer prices, and sales of new and existing homes, to add support to forecast of continued non-inflationary economic growth in the first half of 2010.
“The rising crescendo of positive economic signals in the past several weeks is definitely encouraging for the sustainability of the recovery,” IHS Global Insight US economists Brian Bethune and Nigel Gault said in a report.
“But recent sharp fall backs in consumer and small business confidence are potential speed bumps in the short-term spending and hiring outlook,” they cautioned.
On Friday, a key barometer, the University of Michigan consumer sentiment index’s preliminary reading for April fell to 69.5, from a final March reading of 73.6, the lowest level since November 2009. Economists had forecast the index to climb to 75.0.
Both the critics and the sympathizers of the American consumers are “missing a very big and bullish story,” said Ed Yardeni, president of Yardeni research.
He cited the “real” pay per worker in the United States, which he said had been hovering at a record high over the past six months, based on the monthly personal income data released by the government.
“It is highly correlated with productivity, which soared to a new high at the end of last year. This suggests that real pay will soon do the same,” Yardeni said.