Fri12192014

Business & Real Estate

Government reports offer hope for a rebounding stock market

Stock Report

When the market opened Monday morning, stocks continued their climb after the latest economic numbers showed American's income and spending habits were proving resilient, lifting hopes the U.S. economy may avoid a recession.

The robust gross domestic product (GDP) report the previous week indicated the U.S. economy is holding its own, giving the bulls reason to cheer and send the major averages higher.

Today's conclusions are that the economy will not go into a recession; the bear market is dead; and valuations are becoming attractive.

The Dow Jones industrial average, boosted by the encouraging news about the economy, finished up 2.18 percent last week, pushing it into positive territory for the first time this year. Since April 4, the Dow is up 14 percent. The Nasdaq is also up since April 4, but down 16 percent since Jan. 1.

The Town Crier index, loaded with technology stocks, mirrors the Nasdaq and was down 3.89 percent for the week, but only down 4.49 percent since Jan. 1.

The rush of earnings reports are about over, so most of the bad news is now out. You can expect to see some large increase in technology stock prices, but only the biggest and the best are worth looking at.

Investors are beginning to focus on the flood of data on the U.S. economy that the government issues. The GDP last week was an excellent example. As the market becomes convinced that we are not heading into a deep recession, investors will be looking for an excuse to buy something.

Stocks are always risky so there is no guarantee that prices will continue to go up.

So is it time to get back into stocks? That's something of a trick question, because many longtime investors never thought it was time to get out of stocks.

Long-term investors who won't need their money for five or 10 years should just stay in through the downturns.

Noel, a seasoned investor, covers the stock market for the Town Crier.

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