Closing Market Report

Star-Bulletin news services

Momentum investing
is back -- for now

NEW YORK >> Wall Street accepted a variety of disappointments rather well this past week, with stocks posting only moderate declines in response to sluggish retail sales and a drop in revenue at Cisco Systems.

A few months ago, the market would have fallen much harder on any one negative development, and the fact that it didn't in the wake of several has many observers wondering if a bullish trend called momentum investing has returned.

"We're in an environment now which is typical of momentum investing in which good news is good news and bad news is good news," said Arthur Hogan, chief market analyst at Jefferies & Co.

Even the possibility of deflation, when prices drop too low as demand for goods and services dries up, couldn't keep the market down. The Federal Reserve warned that the economy could be headed into deflation, which can lead to more unemployment and a further slackening demand for products.

But stocks rallied three out of five days this past week, and the Nasdaq composite and Standard & Poor's 500 indexes achieved their fourth straight weekly advance. That kind of resilience is why market observers are talking about momentum investing

The term momentum investing is used to describe periods of vigorous buying on Wall Street, times when investors are more worried about not being in the market sufficiently, rather than losing money.

"Folks don't want to miss the bottom here," Hogan said.

Analysts are encouraged by signs of real strength behind the market's recent rallies. They say there are indicators of investors' growing confidence in the market.

For starters, the Dow Jones industrial average this past week was able to stay well above the 8,500 level, a that had represented heavy resistance for the blue chips. The Dow finished the week at the 8,600 level.

Trading volume has mostly been on the heavy side for the past two weeks. And analysts are heartened to see smaller retail investors buying stocks along with their larger institutional counterparts.

And, the riskier bets, stocks of smaller companies or technology concerns, have enjoyed the biggest gains, a strong indication that investors are feeling better about the market.

For the week, the Dow rose 21.92, or 0.3 percent. It closed yesterday at 8,604.60.

The Nasdaq had a weekly gain of 17.27, or 1.2 percent, closing at 1,520.15 yesterday.

For the week, the S&P rose 3.33, or 0.4 percent, to finish at 933.41.

The Russell 2000 had a weekly advance of 5.86, or 1.4 percent, closing at 413.53.

The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 8,883.34, up 49.28 from the previous week. A year ago, the index was at 10,017.47.

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