US markets expected to rise amid positive signs

By Ellis Mnyandu  |   2009-4-6  |     NEWSPAPER EDITION

UNITED States stocks should rally further this week if investors get more signs that the economic slump is abating and the earnings season does not get off to a rocky start.

Alcoa Inc will report results tomorrow in the unofficial start of first-quarter company results.

But given that the aluminum producer is expected to post another loss, the outlook it provides will be key to investor sentiment.

In the holiday-shortened week, volume could be light, raising the specter of increased volatility as investors look to string together a fifth straight week of gains. Many market participants are likely to be out of the office this week, when Passover begins. Markets will be closed on Friday for the observance of the Good Friday holiday.

After investors got a boost in recent weeks from economic reports suggesting that the grip of the 16-month-old recession may be easing, analysts said stocks probably would make further headway.

The benchmark S&P 500 ended on Friday up 24.5 percent from a 12-year low hit in early March.

The broad market's recovery from that significant low helped to propel the Dow Jones industrial average to its best four-week advance since 1933. On Friday, the Dow closed back above 8,000 for the first time since early February.

For the week, the Dow rose 3.1 percent, the S&P 500 rose 3.3 percent and the Nasdaq climbed 5 percent.

"I think we've still got quite a bit of room on the upside," said William Stone, PNC Wealth Management's chief investment strategist in Philadelphia. "We seem to have become medicated in March and into early April and have shrugged off some negative numbers," he said.

"The medication was that expectations on the economy got low enough that we were able to get some numbers that, while ugly, are a bit better than expected."

The highlights of this week's economic releases include Wednesday's minutes from the Federal Reserve's March 17-18 policy meeting at which it decided to pump an additional US$1 trillion into the US economy by buying government bonds for the first time since the 1960s.

On Thursday, the government will release data on the latest weekly jobless claims and the international trade deficit for February.