Wall St still a bull market despite pullback

Published: 2009/09/28

NEW YORK: Wall Street has stepped back from a spectacular six-month rally, leaving investors pondering the depth of the latest pullback in the context of a fragile economic recovery.

Some analysts say a "correction" would be healthy for the market by working off some of the gains and easing speculative fervour from short-term traders.

Still in doubt, however, is whether the bull market can keep running even after stunning gains of some 60 perc ent for the broad market as the economy struggles to emerge from recession.

Over the past week, the Dow Jones Industrial Average lost 1.58 per cent to end Friday at 9,665.19, as the market pulled back from 11-month highs.

The tech-dominant Nasdaq slipped 1.97 percent to 2,090.92 while the Standard & Poor's 500 broad-market index retreated 2.24 per cent to 1,044.38.

The market appeared to hit a roadblock on Wednesday as stocks rallied in the wake of a Federal Reserve announcement that it intended to hold interest rates near zero for some time.

The rally pushed the Dow briefly above 9,900 but then a pullback began.

Analysts said the market used the occasion to lock in hefty gains and wait for further evidence that the economy is pulling out of recession.

Al Goldman, chief market strategist at Wells Fargo Advisors, urged clients to wait out the correction.

"A several-day pullback has begun," he said.

"We believe it will be measured in days, not weeks but it still must be respected after the 60 per cent rally from the March 9 lows. The big picture is still a bull market which we believe will be higher by year-end."

Bob Dickey at RBC Wealth Management said the market is in "an established bull trend" until proven otherwise.

"Today the market is likely telling us what the economic condition may be six to 12 months from now, and although it currently may not make sense, the market has tended to lead these economic changes historically," he said.

Gregory Drahuschak at Janney Montgomery Scott said that "for the very short-term that the market is getting a bit tired" but that does not alter the long-term outlook.

"We are not concerned about a short-term pullback since we are focused more on GDP (gross domestic product) and earnings potential into the first half of 2010 - potential we do not think the market has discounted fully yet," he said. - AFP