Word got around that the economy was showing the signs of revitalization. The optimism of the experts has quickly been reflected in the buying patterns of investors and the economy is healthy. Yesterday, the Dow Jones industrial average was at a 235 point high, the biggest daily point increase in over a month. This single handedly makes up for three-quarters of last weeks economic plateau and the losses that followed.
An hard to believe profit report from Lowes Company showed increased homebuilder sentiment and optimistic expert feedback throughout the last few weeks revitalized investors confidence in the imminent economic rebound. Stocks began to fall sharply last week as doubts that the stocks were rising too fast, reflected by a still stumpy housing market, interrupted the market rally slightly last week, creating a self-fulfilled plateau that we seem to be exiting as buyer confidence is restored.
Analysts believe that firmness in the housing market is imperative to restoring the economy, which will only come about when loan availability is restored and housing prices can go ahead due to higher demand. There is a recognition that things are going to get better, said James Cox, a managing partner at Harris Financial Group. That is the major theme of the market over the previous couple weeks.
In the face of the recent rallies and yesterdays upswing, the market is projected to remain fickle as more cautious investors see a mounting tide in the economy and belief is restored. They want to see signs that the economy is actually getting better and not just slowing another drop. So far, the rallies in the economy since March have shown sufficient signs of stabilization to attract some investors. According to Linda Duessel, equity market strategist at Federated Investors, the rally was motivated by less bad information. Probably we will get fed up with that as the months progress, she said. We will need something better to move the market.
There was an adequate boost yesterday as Lowes, one of the United States leaders in home improvement products, posted an 8.1% increase. Buying accelerated later as the National Association of Home Builders reflected that increase by reporting that May is beginning to reflect the second consecutive high month in the housing market index.
Banks are also doing well in the market right now. Bank of America posted a 9.9% gain. State Street rose 8.5%. Analysts say the ability for banks to raise money, particularly by using the rallies in the stock market, is a sign of intensity, albeit late, even if added shares make those already in circulation worth a bit less. Now and again, apparently, less is more.
James Cox believes the banks are firm. We are not going to see any of the large banks go down. And now that we have stabilization in the banking system, we can move forward, he said. Nine stocks rose for every single one that fell in Wall Street yesterday, a very confident boost. The dollar fell against all major currencies and gold prices also fell. As awful as that sounds, the dollar has been drastically higher than normal, and gold prices have been the highest ever due to the craving of investors to find something a little more stable. It is very average for gold prices to go up when the market is going downward. They are not conversely linked, but they do tend to have conflicting trends.
Overseas stocks were varied, mostly following frail corporate quarterly earnings in Asia. Japan tended to drop an average of 2.4%, Britain jumped 2.3%, and Germany and France both rose 2.4%. This seems to show more belief in services and finances over technology and products.
