Best September for US markets in half century
The U.S. stock market is likely to notch its best September in more than half a century in the days ahead, provided its recent surge is not derailed by lingering doubts about the recovery.
On track for its best September since 1939, the Dow Jones Industrial Average on Friday added 197.84 points, or 1.9%, to end at 10,860.26, leaving it 2.4% ahead for the week. Snapping a three-day losing streak, the S&P 500 Index rose 23.84 points, or 2.1%, to 1,148.67, up 2.1% from the prior Friday’s close. The Nasdaq Composite Index climbed 54.14 points, or 2.3%, to 2,381.2, a weekly rise of 2.8%.
The end-of-week rally came after data illustrating a rebound in demand for U.S. capital goods, with all three major indexes notching a fourth consecutive week of gains.
As Wall Street finished on a high note, Federal Reserve Chairman Ben Bernanke acknowledged that economists have lots to answer for in the wake of the nation’s latest financial crisis. The speech delivered at Princeton University came three days after the Fed declared itself ready to take further steps if needed to bolster the recovery.
Estimated share-weighted earnings for the S&P 500 for 2010’s third quarter stood at $191.6 billion on Friday, below the prior week’s estimate of $193 billion, according to Thomson Reuters analyst John Butters.
Highlights on the economic calender include a Tuesday reading on consumer confidence in September; a report on U.S. economic growth in the second quarter on Wednesday; and weekly jobless claims on Thursday. The final day of the week brings manufacturing and construction spending reports, as well as data on personal income.
The price-earnings ratio on reported earnings is just below the 70-year average, making for around average valuations. But if one looks at the earnings yield, or the spread between the yields on stocks and the 10-year Treasury note, its roughly at its widest since the early 1980s. People have been moving money out of money-market funds because there were no returns, and going to some risk just to attract some yield.