Last week, the Dow Jones Industrial Average rose over 368 points, or 1.6%, to 22,773, its fourth consecutive week of gains. The NASDAQ Composite Index gained 1.5% to 6,590 – also a record high – while the S&P 500 index moved higher by 1.2% to 2,549. The gains were on the heels of a few economic reports: The Institute for Supply Management’s manufacturing index hit 60.8, its highest level since 2004; better-than-expected jobless claims; and strong durable goods orders. Friday’s weaker-than-expected payrolls report, however, was a negative, but could be explained away due to the hurricanes that hammered the country during September. Looking ahead to next week, September’s consumer-price-index data could provide more evidence of a not-too-hot, not-too-cold economy.
Realizing the goal of consistent 3% growth will be a challenge. A more immediate challenge, however, will be earnings reporting season, where expectations are modest, with the estimated gain in third-quarter profits for the S&P 500 companies now in the low single-digit percentage range. If recent history is a guide, the average will be exceeded. Given the market’s elevated valuations, such out-performance may be needed to sustain the latest rally. Global concerns also are in the forefront. These center on North Korea and its rising nuclear threat and destabilizing rhetoric also is periodically heard out of Iran and other international hot spots, all of which hold the potential to upset the Wall Street apple cart. Through it all, however, the bull market continues to persevere, with new record highs almost on a daily basis. How long and how far the bull will roam is uncertain, although the fundamentals remain sound, and that is always a good sign.