THE MIKIVERSE

US stocks brace for volatile week

• From: AFP June 19, 2010 1:16PM

US stocks ended the week more than 2 per cent higher amid optimism over the global economic recovery, but as Wall St braced for a volatile week with a heavy dose of US economic data.

The blue-chip Dow Jones Industrial Average advanced 2.3 per cent over the week to end Friday at 10,450.64 as traders digested a week of mixed economic data. Some stability in debt-stricken Europe buoyed confidence.

The tech-rich Nasdaq index climbed three per cent to 2,309.80 and the broad-market S&P 500 index gained 2.4 per cent at 1,117.51.

Trade was notably slower than the roller coaster session of previous weeks, analysts said.

"Whether the slower action is the result of market participants taking a breather following the volatile activity over the last two months or the beginning of a summer lull remains to be seen," said analysts at Briefing.com.

One notable exception was New York-listed shares in British oil giant BP, which were hit hard following the company's massive oil spill in the gulf and as its credit rating was slashed by top rating agencies.

BP's shares fell 6.5 per cent for the week, after trading close to 52-week lows in the middle of the week.

The focus of next week's trade is sure to be a meeting of the Federal Reserve's policy-making body on Tuesday and Wednesday.

The Fed board is expected to vote to keep interest rates unchanged at virtually zero per cent as the economy continues to be dogged by unemployment concerns.

While no interest rate changes were expected, "the status of the extra measures the Fed has taken to address liquidity and the cost of capital will continue to be monitored," analysts at Charles Schwab & Co said.

And other data will be scrutinised.

In the coming week, the market will grapple with existing home sales for May that are expected to show a jump as well as new home sales for the same month that many believe would slump.

The government will provide a final revision of the 2010 first quarter gross domestic product growth, which is expected to remain unchanged at 3.0 per cent.

"All of those data releases have the potential to move the markets," analysts at Briefing.com cautioned clients in a note.

Traders are expected to remain cautious even though stocks climbed nearly all of last week.

The stock market is expected to "continue to drift going into second quarter earnings season (July), moving up and down in tandem with the movement of the euro and headline news coming out of Europe and the Gulf of Mexico," said Frederic Dickson, chief market strategist with DA Davidson & Co.