Strong Market Movement Kick Its 4th ConsecutiveWeek Gains

Stocks jagged their fourth week of gains on Friday as investors used a increase in trade spending to revive the September rally after 3 days of cutbacks.

Financial data gave a mixed picture, but traders latched on to a climb in August trade spending because the latest indication the recovery is on firmer ground. That seemed to trump a lackluster report on new home sales in August.

"Last month investors were positioned for what we thought would be a double-dip downturn and substantial inflation, but since it ended up being not nearly so bad, we've swung the other way," said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
Buying was broad across sectors, with about five stocks increasing for every one that fell within the New York Stock Exchange, and 4 stocks rising for each one that fell on the Nasdaq.

For September, which can be historically a weak month, the S&P 500 is up 9.5 percent.

Traders said the need for money managers to spice up quarter-end performance bolstered buying.

Ongoing a recent trend, volume was very light, with only 7.55 billion shares traded over the NYSE, Amex and Nasdaq, far under the earlier year's daily average of 9.65 billion shares.
"The degree suggests there's not broad retail participation, and to have conviction within the rally, you'd like to find out that," Glazer said.

The government reported non-defense capital goods orders, which are closely watched as a proxy for trade expenses, surged just above 4 percent in August, a rate twofold what was expected.

The Dow Jones industrial average (.DJI) was up 197.84 points, or 1.86 percent, at 10,860.26. The Standard & Poor's 500 Index (.SPX) finished up 23.82 points, or 2.12 percent, at 1,148.65. The Nasdaq Composite Index (.IXIC) was up 54.14 points, or 2.33 percent, at 2,381.22.

For this week, the Dow was up 2.4 percent, the S&P rose 2.1 percent and also the Nasdaq added 2.8 percent.

Traders noted that a short bias going into the open this morning was chased out when the market held its gains after the flat housing data. That hard-pressed prices up as traders covered short positions.

The broad-based S&P 500 index crossed a major resistance level at 1,130 on Monday, but its close below that mark in the last session and lightweight trading volumes have caused some traders to question the move's sustainability.

Other technical indicators are pointing to an overbought condition in the S&P 500, although the declines of the last three days have eased that somewhat.

"It is my opinion what you have here is month-end and quarter-end stress developing with huge asset-allocation trades," said Tom Sowanick, chief investment officer of the Princeton, New Jersey-based OmniVest.

Shares of builder KB Home (KBH.N) rose 3.4 percent to $12.11 after it posted a smaller-than-expected third-quarter loss. The news offset the weak housing data, and the Dow Jones home construction index (.DJUSHB) rose 2.9 percent.

Nike Corp (NKE.N) rose 2.4 percent to $79.57 per day after this company reported more powerful-than-expected orders and earnings.

All 30 components of the Dow industrials rose, together with Advanced Micro Devices Inc (AMD.N) regardless that the chipmaker forecast a decline in revenue.

Boosting trader sentiment was the share offering of Brazilian state oil company, Petrobras. The sale of nearly $70 billion in shares surpassed expectations, erasing concerns that stocks were less appealing assets. U.S.-listed shares rose 2.9 percent to $16.13.

After the market closed, Federal Reserve Chairman Ben Bernanke spoke at Princeton University but didn't talk about the perspective of the economy or fiscal policy.

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