News Column

Dog days? No way! Summer stocks steam

August 28, 2014

By Adam Shell, @adamshell, USA TODAY

The early-summer swoon has given way to a stock market regaining its bullish form, with the Standard & Poor's 500 on track for its best August performance since 2000 -- ahead of what historically has been a rocky September for stocks.

Wall Street angst surrounding mid-July's 4% pullback, which was set in motion by a spike in geopolitical fears caused by conflicts in Ukraine and the Middle East, has given way to rising investor optimism about the outlook for the U.S. economy and ability of companies to churn out big-enough profits to support the market's upward march.

Despite a 3-point loss Thursday to 1997, the S&P 500 is up 3.4% for the month. With one trading day left, the benchmark U.S. stock index is on pace for its best August performance since 2000. On Tuesday, it closed above the 2000 milestone for the first time, and Wednesday, it notched its 31st record close of the year.

"The market is refocused on earnings and economic data," says Anthony Valeri, market strategist at LPL Financial.

Stocks, however, are heading into a seasonally weak month. September has been the worst-performing month for the Dow in the past 50 and 100 years, says Bespoke Investment Group.

The brightening outlook for the U.S. economy was clear Thursday, when the government revised second-quarter growth, or GDP, upward to 4.2% from 4%. The second-quarter earnings season has also been strong, with companies in the S&P 500 posting earnings growth of nearly 9%, says Thomson Reuters, a performance Valeri dubs as "rock solid." The good news on the economy has boosted consumer confidence to a post-recession high.

Confidence is up and fear is down, says Doug CotÉ, chief market strategist at Voya Asset Management. He cites the robust deal market, such as the recent Burger King marriage with Canadian-based Tim Hortons, as a key catalyst boosting stocks. "It sends a very strong message that there is confidence, that the economic expansion is broadening," he says.

Still, while investors have shrugged off geopolitical fears for the most part, the market showed signs of jitters Thursday when news spread that Russian troops continue to be active inside Ukraine, prompting fears that the squabble will escalate.

"That could be a worry," says Quincy Krosby, market strategist at Prudential Financial.

Spencer Platt, Getty Images

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Source: USA Today

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