Market review: week ending Oct. 24



After three weeks of significant market losses, this week was a welcome turn in the markets. The S&P 500 posted its best weekly gain in two years in response to positive earnings announcements and improving investor sentiment, recovering nearly all of the 8 percent lost in the pullback of the previous week. The Dow Jones Industrial Average performed worst of the three major indices, partially due to IBM’s poor performance and the index’s exclusion of Apple which performed very well. The technology-heavy Nasdaq performed best, posting a gain of over 5 percent.

Earnings announcements were the primary market drivers this week. Despite some negative surprises, positive earnings reports inspired good investor sentiment early in the week. Overall, the earnings reports suggest that profits are growing faster than expected, inspiring a rally on Tuesday.

Fears about foreign market recession that contributed to the recent pullback were relieved this week. Data from China, Japan and Europe all showed increasing manufacturing activity and alleviated fears that overseas markets would soon slip into recession. Also aiding the week’s gains was news from the European Central Bank, stating that it would take action to boost growth in Europe.

U.S. economic data were also encouraging. A rise in home sales as well as strong readings from the manufacturing sector supported the rally. Inflation data suggest that inflation is reasonable for the year despite growth in the overall economy.