NEW YORK — With stocks basking in the aftermath of the best two-month blue-chip run in more than six years, investors cheered by corporate results looked ahead Friday to bank-stress- test results this week and economic data.
“We’re off to a good start (for the month). We’re leaving a period where people were afraid of losses and entering a period where people are afraid of missing gains,” said Lawrence Creatura, portfolio manager at Federated Clover Capital Advisors.
On Friday, energy shares led gainers as the Dow Jones industrial average advanced 44.29 points, or 0.5 percent, to 8,212.41, giving the blue chips a weekly gain of 1.7 percent. The S&P 500 climbed 4.71 points, or 0.5 percent, to 877.52, which would translate into a 1.3 percent gain from last Friday’s close. The technology-laden Nasdaq Composite added 1.90 points, or 0.1 percent, to 1,719.20, giving it a 1.5 percent weekly advance.
The report drawing the most attention is Friday’s unemployment report, with the count of the nation’s jobless expected to climb from 8.5 percent in March.
“The payroll survey will show another large decline in jobs, but look for another lower month-over-month report and a number that may come in at less than 600,000 jobs lost. Unemployment will continue to rise but at a slower rate from the current 8.5 percent, to 8.7 percent or 8.8 percent,” said William Knapp, investment strategist at MainStay Investments. “So far we’ve had a stock market recovery and not an economic recovery. The stock market moves first, and then the data follows,” Creatura said.
That said, “unemployment is absolutely key, with 70 percent of our GDP (gross domestic product) linked back to the consumer, an economic recovery will by necessity have the consumer participating,” Creatura added.
Some analysts questioned the sustainability of a rally largely fueled by first-quarter earnings.
The slew of upside surprises in first-quarter reports came as companies slashed expenses and as a result of analysts slashing their forecasts too low, said Dan Greenhaus, an analyst at Miller Tabak.
“Going forward there is only so much rallying equities can do simply by beating lowered expectations. To undergo a longer-term and sustainable advance, companies must grow revenue and they must grow earnings,” he said.
Financials also faltered amid reports the stress results initially due Monday would be delayed until Thursday.
“The recent rally in most of the largest banks may quickly end if several banks involved in the stress test are shown to need a significant amount of additional capital,” Dickson said.
“Wall Street hates uncertainty,” added Dickson, noting reports that as many as six of the 19 banks involved in the stress test need more capital.
The stock market appeared to take in stride Thursday’s Chapter 11 bankruptcy filing by Chrysler LLC, but some analysts said its ramifications may yet be felt.
