Rate Decisions Help the Rally, Is 1200 Points Wishful Thinking?

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Rate Decisions Help the Rally, Is 1200 Points Wishful Thinking?

Post  harpal1980 on Mon Oct 12, 2009 5:11 am

Global equity markets rallied significantly last week, as optimism about global growth returned to the markets. The Dow Industrial average finished the week at 9864 reaching a 52 week high, two years after reaching an all time high of 14,198 points. The S&P 500 Index (the broader market index) rallied 46 points or 4.6% to settle the week at 1,071.

Optimism began already early in the week after the Institute for Supply Management reported that its index of nonmanufacturing activity jumped last month to 50.9, from 48.4 in August, while its business activity/production index hit 55.1, from 51.3. These positive results pushed the S&P 500 up 15 points or 1.5% at the start of the week, showing investors that the U.S economy is slowly crawling out of its recession. One must note that a number above 50 is classed as a positive sign and will often point to expansion. The news immediately sparked a rally and forced the S&P500 index back into trend. To date the S&P500 is now stuck below major resistance. A break of current levels to the upside could spark another rally bringing the broader market up to the 1200 mark.

Positive news continued to grip the market at the beginning of the week as the Reserve Bank of Australia increased its benchmark interest rate to 3.25% from 3.00%. The surprising news pushed the US equity markets and Dollar counterparts higher, with DJIA and S&P rising 1.4% and 1.4%, respectively. On the Forex market the Australian Dollar soared higher reaching a weekly high of $0.9098. Similar to the S&P500 the European markets rose too, as DJ Euro Stoxx 50 ended up 2.7%

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