Investors will look for signals about economy – Tyler Vernon – Los Angeles Times

Investors will look for signals about economy – Tyler Vernon – Los Angeles Times

Concern that a recovery may be slower than expected, fueled by last week’s downbeat housing and factory data, could put the recent rally on hold this week. But sector reports due out may ease fears.

September 28, 2009|Associated Press
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“It’s quite clear that some of these stimulus programs have had a favorable impact on the economy,” said Ward McCarthy, chief financial economist at Jefferies & Co. That could “create the potential for some disappointment in the months ahead when these stimulus programs expire.”
The market has been on a fairly steady climb since hitting 12-year lows in early March. With the Standard & Poor’s 500 index up 54.4% since then, many analysts have been warning that the market will inevitably retreat, and perhaps see more selling than the periodic pullbacks such as the drop that stocks suffered in June.
What may ultimately lift the market is the fact many investors are still not in the market and may want to get in for fear of missing another rally.
“On the bullish side, we have all this cash and people looking to get in on the dips, but on the bearish side, this market has run so much ahead of the fundamentals,” said Tyler Vernon, portfolio manager at Princeton, N.J., investment management firm Biltmore Capital Advisors.
Analysts say last week’s decline doesn’t necessarily mean the market’s sentiment has changed. If anything, investors have come to accept that some of the economic data, especially on the labor front, will be weak for the foreseeable future.
The number of people who lost their jobs in August slowed from the previous month, but the unemployment rate swelled to 9.7%, the highest level since June 1983. Many analysts are expecting the unemployment rate to climb to at least 10% by the end of this year.
“We have to understand that we’re in the early stages of a recovery, and in the early stages of a recovery the data tend to be mixed for the simple reason that . . . not all sectors or regions of the economy recover at the same time,” Jefferies’ McCarthy said.