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The Markets This Week

March 5, 2014 | Weekly Commentary

The big question for investors on the sidelines over the past two years has been: Am I late to the party?

Fret not. This party never seems to end.

The S&P 500 hit another new closing high on Friday, and the Dow finished just 1.5% off its all-time peak. Importantly, the S&P closed on Thursday above 1850, a technical level that investors have been talking about for weeks.

Asked why everyone’s so bullish, several strategists pointed to strong consumer confidence data and evidence of sales growth for durable goods—major manufactured products like electronics and defense equipment. Federal Reserve Chair Janet Yellen also helped lift markets in testimony before Congress when she remarked that economic data had been surprisingly weak for the past six weeks, opening the door to a pause in the taper.

Results from retailers also indicated that Americans are feeling confident. Macy’s(ticker: M) reported better than expected earnings results and held the line on holiday season discounts, even as its peers gave away the store.

But data and Fed-speak just added extra oomph to the Street’s already-bullish sentiment. “I don’t think there was a particularly strong positive catalyst,” said Paul LaFleche, who oversees a $13 billion portfolio for insurer FM Global. “Maybe it’s the absence of negatives. People continue to have a lot of cash and want to come back to stocks.” La-Fleche says FM Global’s portfolio tends to hold 45% to 50% in equities, but the firm has increased its equity weighting to more than 50%.

Sunday March 9 will mark the five-year anniversary of the S&P 500’s closing low of 676.53. Including dividends, stock returns have more than tripled since then. LaFleche says the growth has mostly been driven by multiple expansion—investors willing to pay more for the same earnings. He agrees with most strategists that stocks will rise by high single digits this year, driven almost entirely by earnings growth.

For the week, the Dow Jones Industrial Average rose 1.4%, or 218 points, to 16,321.71. The Standard & Poor’s 500 index rose 23 points, to 1859.45. The Nasdaq Composite index climbed 1%, or 45 points, to 4308.12.

The Dow rose 4% in February, and the S&P 500 was up 4.3%, its best February reading since 1998. Several stocks have considerably outpaced the benchmark. In fact, 77 stocks have risen at least 10%, while only 30 have fallen that much. “Maybe it’s a stockpicker’s market,” commented Howard Silverblatt, an analyst at the S&P Dow Jones Indices. (Source:  Barrons Online).

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