Stocks poised for further gains on better than expected economic data

Stumble Upon

del.icio.us

Digg

Facebook

Print

Email

speakup

TORONTO - The Toronto stock market could be set for another positive week with investors feeling some relief that the United States might just be dodging the recession bullet, says Doug Porter, deputy chief economist at BMO Nesbitt Burns.

Enlarge Photo

AP

Michael Carusiello, right foreground, and other traders shout orders in the Euro options pit on the CME Group trading floor in Chicago shortly after the Federal Reserve cut a key interest rate by a quarter-point down to 2 percent, its lowest level since late 2004. It was the Fed's seventh consecutive rate cut since it began easing credit conditions last September to combat the growing threat of a recession brought on by a deep housing slump and credit crisis.

"I think overall most of the numbers we've seen have been consistent with something just short of a full blown recession, something very close to lacklustre growth but certainly not as bad as some of the gloom and doomsters were talking about a few weeks ago," Porter says. "The market has definitely taken heart from that as well as continued signs that we may -- may -- be just past the worst of the credit crisis.

"When you have a few central bankers and top officials basically saying that we could be past the middle part, I think that gives a sense that the worst may be over. Certainly equity markets seem to be leaning in that direction."

Market sentiment got a big boost on Friday when the U.S. Labour Department reported its non-farm payrolls report for April showed job losses totalling 20,000 -- a far cry from the 80,000 that had been expected.

It was the third major piece of decent economic data out during the week. Earlier, data showed the U.S. economy growing at an annual rate of 0.6 per cent in the first quarter.

And the U.S. Federal Reserve lowered its key funds rate another quarter point to two per cent and left the impression the current series of cuts could be over.

Signs that the U.S. economy isn't doing as badly as previously thought boosted oil prices, which at one point were down five per cent during the week before rallying Friday.

"We've seen some pretty serious pullbacks for oil before only to see it coming roaring back even stronger so I certainly wouldn't want to count it out yet," Porter says.

"And if the U.S. economy turns out to be slightly firmer than expected then it reduces the odds that demand is really going to fall off the table."

However, Porter points out that despite some decent economic news last week, the stark reality is that growth is slowing in the U.S., Canada and Europe.

And that could have an effect on earnings.

"I think that might become a bigger issue for the markets and I'm not saying the news is necessarily going to be bad, just that it might become a bigger market focus through the rest of the spring," he says.