Business News

A surprise big rally

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by Peter Switzer

Despite the fact that a correction is overdue, Wall Street roared ahead and it was due to good news out of Europe as well as better-than-expected company earnings reports out of the US.

The Dow ended up 194.13 points, or 1.5 per cent, while the S&P 500 put on 21.21 points, or 1.55 per cent, to 1390.78, taking the index nicely above the 1370-level, which had been a resistance level.

Healthy companies

At the moment, US company news for the first quarter of 2012 is looking way healthier than experts were predicting and Apple had a booming day at the office after being trashed for five days in a row. The stock’s top was US$644 in early April and it’s now around US$607.

Meanwhile, both Citigroup and Goldman Sachs reported better than expected and it resulted in bank bear Meredith Whitney changing her view on Citi from a sell to a hold. This could be a significant turning point for financial stocks generally.

The big news

I reckon the big news was the Spanish bond auction that went pretty smoothly, though yields were on the high side and that helped European stock markets. Also, German economic sentiment levels were the best since April 2010.

Back in the US, that mixed economic data continues with housing starts diving 5.8 per cent but levels of this reading are still very high and bullish for the sector. The housing news follows the disappointing homebuilder sentiment report in the previous session.

Against this, industrial production has gone nowhere for two months.

Correction overdue

This big bounceback of stock prices could prove significant but the hardheads still insist a correction is overdue — only time will tell, but for the long-term investor there are some nicely positive signs that the worst is getting behind us and a sustained bull rally will happen.

I’m only spooked by the debt challenges and the bond yields in Europe. If these can be dealt with then I think the good times can roll for stock players.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Wednesday, April 18, 2012

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