A bull-market rally has brought US stock prices close to another milestone, just as companies begin reporting their earnings for the third quarter.
Already, a big rise in stock prices in recent months has strengthened the financial position of millions of Americans. The Dow index of 30 major US stocks has risen by more than 50 percent from its March low. The broader Standard & Poor's 500 index has risen even more.
The question this week is whether that bull rally is about to run out of steam or gather new momentum. October is a notoriously high-risk month for stock-market investors, but so far this month, share prices have been rising. A handful of high-profile companies have offered investors room for more cautious optimism:
• On Tuesday, high-tech bellwether Intel reported quarterly earnings of $1.9 billion, or 33 cents per share – a bit above what analysts had predicted. The chipmaker also raised expectations for the fourth quarter, helping to buoy hopes for other good news from the industry. Companies such as Google report earnings in coming days.
• The railroad firm CSX said its freight traffic continued to decline, but at a slower pace than in the second quarter. Like Intel, CSX reported better-than-expected earnings ($293 million) for the third quarter after the markets closed on Tuesday. The company said an economic recovery may be starting. But railroads still have a big hill to climb to get back to prerecession levels of activity.
• Aluminum giant Alcoa posted a surprise profit last week, thanks to both cost cutting and improving sales as the auto industry sped up production.
At Standard & Poor's, an investment strategy committee says it expects more gains for stocks, despite widespread concerns that at some point the bull rally will hit a speed bump.
"We think the S&P 500 could maintain its upward bias during October and November," chief strategist Sam Stovall wrote for the committee Tuesday. S&P sees a possible rough patch by mid-December, followed by "a further advance ... in the New Year as investors continue to incorporate improving global economic growth."
That's just one forecast, of course. And it's still early to define an overall trend for the quarter.
Investors are pinning many hopes on a continuation of the cost-cutting trend, on rising merger activity, and on improvements in overseas economic conditions – with profits there potentially aided by a weak dollar.
A 'rebalanced' world economy
Click here for a look at how American consumers may have to change their ways, no longer borrowing madly to buy so many goods from abroad.
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