Is this a sucker's rally or the real thing?
As investors approach next week, there will be plenty for them to consider. Earnings are due from a variety of companies ranging from drug retailer Walgreens (WAG) to firearms company Smith & Wesson (SWHC) to software giant Oracle (ORCL) and retailer Bed, Bath & Beyond (BBBY). Then there's the ongoing political turmoil in North Korea, Iran and Nigeria.
For months, depression and despondency ruled the markets, pushing down shares of even well-run companies gaining market share. But that's all changed now as improving economic data has given Wall Street optimism that the economy will begin turning around in September. While positive sentiment has boosted the market by 40 percent since hitting a 12-year low in March, this week didn't prove or disprove that the good times are coming back.
The Standard & Poor's 500 index rose 2.8 percent Friday as oil prices retreated despite concerns about the political turmoil in Iran, where protesters have filled the streets of major cities to protest the outcome of the election, and Nigeria, where rebels attacked a pipeline. Traders pushed the Dow Jones industrial average down 15.87 points or 0.19 percent, to 8,539.73.
As The Wall Street Journalnoted, "Traders said they were bracing for weak demand in the U.S. and other oil-consuming nations still stuck in recession. . . . Participants have also been selling stocks steadily since late-morning news reports that U.S. Navy ships are preparing to intercept a North Korean vessel suspected of transporting nuclear material."
Oil stocks such as Exxon Mobil (XOM), Chevron (CVX), and Marathon Oil (MRO) traded down in late trading. That's especially surprising considering the harsh rhetoric of Iran's Supreme Leader, Ayatollah Ali Khamenei who refuted widespread criticism that election results were fraudulent.
The tech-heavy Nasdaq Composite Index posted a gain of 19.75 points, or 1.09 percent, to close at 1827.47. The move up was helped by gains in the shares of Apple (AAPL) due to the company's announcement of a new line of iPhones. Shares of the Cupertino, Calif.-based company are up more than 63 percent this year. Microsoft Corp. (MSFT) continued its recent gains as Wall Street bet that the gains in market share by the Bing search engine will continue. Goldman Sachs also added the world's largest software maker to its Conviction Buy List.
For now, investors are still waiting for proof that the light at the end of the tunnel is not an oncoming train.
"We're not falling off a cliff into an abyss, like we were in the fall," Alan Valdes, a trader for Hilliard Lyons, told the Journal, referring to the economy. "But people aren't yet embracing a recovery, doing hiring and things like that."