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Financial markets

Summer Rally Looms as Market Returns to Mid-June Highs

Strategic Insights

— 1 min read

The stock market demonstrated a sense of levity yesterday, gaining only 1.62 points, or 0.04 percent, to close at 3,755.43 on light trading volume. Despite this timid performance, the market's major leading indexes have returned to their mid-June highs, sparking speculation about a potential summer rally. Analysts like Rao Chalasani, chief investment strategist at Kemper Securities, believe the rally may have already begun, albeit late and potentially extending into September.

Key Takeaways:

  • The Dow Jones industrial average gained 1.62 points to close at 3,755.43 on light trading volume, marking a return to mid-June highs.
  • Analyst Rao Chalasani believes the summer rally is already occurring, citing the currency markets' bet that the dollar has reached bottom or is close to it.
  • The rally is likely to be driven by the dollar's strengthening and the bond market's improvement.
  • Many stock traders expect the Federal Reserve to raise interest rates later this year, which could help corporate earnings and stock prices.
  • David Shulman, chief equity strategist for Salomon Brothers, predicts the Dow could rise 100 points or more over the next three weeks.
  • However, Shulman also cautions that a large market decline of up to 400 points in the Dow is still possible by the end of the year due to sensitive and volatile numbers like monthly unemployment figures.

Statistics:

  • The Dow Jones industrial average closed at 3,755.43, an increase of 1.62 points.
  • The broader Standard & Poor's 500 rose 1.06 points to 455.22.
  • The smaller-company Nasdaq composite index rose 1.26 points to 722.62.
  • Volume on the New York Stock Exchange was 227.5 million shares, 20 percent below this year's average of 288 million shares.
  • 13 out of 30 component stocks that make up the Dow industrials rose, led by Aluminum Company of America, which rose 2 1/8 to 82 1/2.
  • 131 out of 500 component stocks that make up the S.& P. 500 rose, led by Wal-Mart, which rose 1/2 to 25 7/8.

Sources:

  • New York Times, "Market Rouses, Barely, as Dow Gains Only 1.62 Points"
  • Rao Chalasani, chief investment strategist at Kemper Securities
  • David Shulman, chief equity strategist for Salomon Brothers

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