Dow could hit 11,000 this week

NEW YORK: The Dow industrials could hit 11,000 this coming week, starting March 29 as investors bet the U.S. labor market had a significant turnaround in March, showing the economic recovery is in good shape, according to Reuters.

The Dow and the S&P 500 stock indexes are at their highest in nearly 18 months and the expected repositioning before Wednesday's end of the quarter could provide further support. With the Dow closing above 10,850 on Friday, it would need to rise 1.4 percent -- or a tad less than 150 points -- to reach 11,000 level.

But with benchmark U.S. Treasury yields approaching 4 percent, investors may prefer the relative safety of U.S. debt instead of continuing to throw money at a stock market that has risen steeply for more than a year.

Economists expect data on Friday to show the economy created about 190,000 jobs in March, but stock investors will have to be brave enough to bet on that confirmation ahead of the data, since the market will be closed for the Good Friday holiday.

Wednesday's private-sector jobs data and Thursday's jobless claims could support those willing to step out on a limb.

"Obviously, the jobs number is the most important thing" next week, said Phil Orlando, chief equity market strategist at Federated Investors, in New York.

"You are going to get this delayed reaction (the following) Monday, unless the claims numbers are just so terrific, that you get some pre-buying ahead of Friday."

Stocks closed higher for a fourth straight week, around levels not seen since September 2008, as recent uncertainty stemming from fiscal problems in some European countries and the healthcare overhaul receded.

A European Union agreement on a safety net for Greece restored investor confidence, but that net could prove small if fiscal burdens bog down other EU members like Portugal, whose debt rating was cut on Wednesday by Fitch.

"Clearly, there is the potential for there to be fiscal issues with other countries in Europe, but the Europeans have now set a precedent that they intend to backstop any negative fiscal situations," said Ken Farsalas, portfolio manager at Oberweis Asset Management in Lisle, Illinois.

Sentiment, nonetheless, remains downbeat. A stock market sell-off on Friday following news a South Korean naval ship had sunk suggests risk takers are ready to sell on any troublesome news -- and ask questions later.

Main indexes closed little changed on Friday.

For the week, the Dow Jones industrial average rose 1 percent, while the Standard & Poor's 500 Index gained 0.6 percent and the Nasdaq Composite Index advanced 0.9 percent.

THE CURIOUS THREAT OF THE RISING YIELD

The yield on the benchmark 10-year U.S. treasury bond brushed 4 percent in the past week, foreshadowing a possible roadblock for stock bulls.

Three government debt auctions last week had "mediocre, at best"results and rising yields "at some point, become an obstacle for equities," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

Yielding 4 percent and with the relative safety of U.S. government debt, Treasuries could entice investor money that would otherwise continue to pump into stocks.

And rising yields also lead to higher borrowing costs.

"It becomes worrisome with a fragile economy that's trying to gain traction and momentum," Krosby said.

Investors will have plenty of data points to gauge that momentum in the coming holiday-shortened week.

The state of the consumer will be measured by February income and spending data on Monday and March consumer confidence, on Tuesday.

Personal income is expected to rise 0.1 percent, mirroring the previous month's rise, while the Conference Board's consumer confidence index is seen rising to 50, from 46 in February, according to economists polled by Reuters.

The S&P/Case-Shiller home prices index for January, due on Tuesday, is expected to show house prices fell 0.7 percent year-over-year, a much slower pace than the 3.1 percent recorded in December.

CONSTRUCTION [] spending in February, due on Thursday, is seen dropping 1 percent.

On the labor market front, next Friday's widely followed non-farm payrolls report is expected to show 190,000 jobs were created in March. The U.S. unemployment rate is seen unchanged at 9.7 percent.

Payrolls data follows the ADP National Employment Report on Wednesday, where economists hope to see the private sector created 40,000 jobs in March, as well as Thursday's report on initial claims of unemployment insurance, which are predicted to dip to 440,000 in the latest week from 442,000 in the previous one..

Rounding out the economic data for the week, business activity in the Midwest will be measured on Wednesday by the Chicago PMI, seen ticking down to 61 in March from February's 62.6.

Thursday's report on U.S. manufacturing from the Institute for Supply Management is expected to show factory activity continued to expand, with the March reading edging up to 56.8 from 56.5 in February. Domestic car and truck sales for March are also expected on Thursday.

QUARTER'S END COULD SPUR MORE GAINS

Next week could also see a tick up in volume, the lack of which has dogged the market in the past few weeks.

With Wednesday marking the end of the quarter, some managers will reposition their portfolios by selling laggard stocks and switching to stronger names.

If stocks benefit further from this window dressing, backed by the expectations of strong data points, the three major U.S. stock indexes could be on track for a fifth straight week of gains. That would be a streak not seen since the six weeks that followed the bottoming of the market just over a year ago. - Reuters

Note: DOW hit 11,000 on April 9, 2010.