S&P 500 Approaches 2,000 as V-Shaped Rebound Recurs Sixth Time

Thursday, 21 Aug 2014 04:11 PM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

The U.S. bull market keeps on ticking.

Shares in the Standard & Poor’s 500 Index have rallied back to an all-time high, recouping losses in a 10-day advance that brought the index within 0.5 percent of 2,000. The rebound was the sixth in two years where equities needed less than two weeks to recover after a drop of 2 percent or more, according to data compiled by Sundial Capital Research Inc.

The V-shaped pattern of losses followed by gains is recurring more often than any time in almost eight decades, Sundial data show. Investors are quick to both sell and buy in a market that has gone almost three years without a retreat of 10 percent as the strengthening U.S. economy puts a floor under declines spurred by crises from Argentina to Ukraine.

“It’s like trying to push a beach ball underwater and having it pop right back up,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said. “That’s what’s been happening to equity markets as the Federal Reserve has been accommodative.”

Almost $900 billion has been restored to American equity values since early August and the S&P 500 is heading for a third straight weekly advance, bolstered by easing tensions in Ukraine and speculation that the Fed will continue to support the economic expansion.

Record High

Stocks rallied as data showed fewer Americans than forecast applied for unemployment benefits last week and purchases of previously owned U.S. homes unexpectedly rose in July.

The gains are coming after the S&P 500 started August with the worst weekly decline in more than two years. The index tumbled 2.7 percent over the five days through Aug. 1 as Argentina defaulted on debt, President Barack Obama announced new sanctions against Russia and U.S. gross domestic product expanding at 4 percent spurred concern that the Federal Reserve may lift interest rates sooner than anticipated.

The index reached a two-month low on Aug. 7 and has since risen in all but two days.

“There is a great hesitation to buy at new highs and then feel stupid when the inevitable correction hits,” Jason Goepfert, president of Sundial in Blaine, Minnesota, wrote in an e-mail. “So once we’ve seen a bit of a dip, we can rationalize to ourselves that, ‘Well, at least I didn’t buy at the high, even if we do decline further.’ That feeds on itself and pretty soon we’re right back at new highs again.”

V-Shaped Move

Goepfert found that the only time when V-shaped rebounds happened more often than now was during the two years through December 1936. At that time, seven occurred.

He defines the move as a drop of at least 2 percent over five to 10 days and a subsequent gain of a similar magnitude over a comparable period. During the process, prices have to set at least a one-month low and not fall back within 0.5 percent of the bottom on a closing basis.

The U.S. stock market has experienced similar patterns in the first two months of 2014. The S&P 500 sank 2.1 percent on Jan. 24 and 2.3 percent on Feb. 3 before bottoming. Over the next six days, the index pared most of the losses, jumping 4.5 percent.

“Some of the downturns had to do with geopolitical concerns, and in some cases those have abated a bit and the market has bounced back,” John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $220 billion, said. “The outlook for the rest of the year is pretty positive.”

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Jobless Claims Increase to Almost Three-Month High

Wednesday, 26 Nov 2014 08:36 AM

The number of Americans filing new claims for unemployment benefits last week rose to the highest level since September, . . .

Workers Can Now Merge 401(k) Plans into Company Pension Plans

Tuesday, 25 Nov 2014 18:45 PM

Those of us who work for companies that have both 401(k) plans and defined-benefit pensions are in luck. . . .

CNBC: Consider Defense, Utility Shares if GDP Growth Slows

Tuesday, 25 Nov 2014 19:20 PM

If economic growth slows, as some analysts expect, CNBC suggests investors should take a look at defensive sectors, such . . .

Most Commented
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved