Newspaper article The Christian Science Monitor

Stock Market Surge Will Likely Pull Back This Fall, Analysts Say

Newspaper article The Christian Science Monitor

Stock Market Surge Will Likely Pull Back This Fall, Analysts Say

Article excerpt

THE stock market has been on an upward roll. It has been fueled by a slowing economy that should provide growth without risk of additional inflation, solid corporate profits, hefty investment by the public in stock mutual funds, and a perception by investors that the Federal Reserve may not announce another hike in interest rates until at least after the November congressional elections.

The question now is whether the pell-mell rising market will soon abate or continue through September. Historically, September has not been a strong month for stocks. Based on the breadth of the recent market rally, the consensus on Wall Street is that while additional market gains can be anticipated early this fall, a retrenchment also seems likely.

"So far, the market expansion has been like the Energizer rabbit," says Dennis Jarrett, who heads up technical research for New York investment company Kidder, Peabody & Co. "It just keeps going and going and going."

Since late June, the market, as measured by the Dow Jones industrial average, has shot up 7 percent, Mr. Jarrett says. "The Nasdaq {over-the-counter} market has done even better - it's shot up over 10 percent." Even if the market were to show downward momentum, as it did in trading Tuesday, "I expect the Dow to reach a new all-time high" sometime in September, Jarrett says.

Still, he says he expects a "pullback" {correction} of between 10 percent and 15 percent in October or November. Following that downturn, there will be a resumption in the upward climb of the market, Jarrett reckons.

"Whatever you call this, a `summer rally,' a `late-summer rally,' or the beginning of a `fall rally,' the market has been showing a strong surge," says Larry Wachtel, a vice president at Prudential Securities Inc., a New York investment house. "There's no single reason. …

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