- The Washington Times - Saturday, July 25, 2009

NEW YORK | Optimists are back in control of the stock market, but they are cautious optimists.

Major stock indicators have climbed 11 percent in the past two weeks to their best levels since last fall as a series of upbeat earnings reports and forecasts boosted investor confidence about an economic recovery. Over the past 10 days, the Dow Jones Industrial Average jumped 947 points and broke through 9,000 for the first time since January.

On Friday, though, investors showed their conservative side, selling tech stocks and making mostly modest purchases of other shares following weak profit reports from Microsoft Corp. and Amazon.com Inc.

Microsoft fell $2.11, or 8.3 percent, to $23.45 after the company reported revenue that fell short of analysts’ forecasts. Amazon.com also reported weaker-than-expected sales, dropping $7.38, or 7.9 percent, to $86.49.

Still, the past two weeks have shown that investors believed there was enough justification from companies’ reports for Wall Street to resume the rally that began in March but stalled in June. This week, heavy equipment maker Caterpillar Inc., manufacturing conglomerate 3M Co. and Ford Motor Co. turned in better-than-expected results or boosted their forecasts for the rest of the year.

The economy has also helped - the stock market’s biggest jump of the week came Thursday as the Dow gained 188 points on news of the third straight monthly gain in existing home sales in June.

The market’s latest climb reflects a mix of forces. While earnings and economic news have fed the rally, some analysts link part of the buying to short-covering, where investors have to buy stock after having earlier sold borrowed shares in a bet that the market would fall. That rush to cover ill-timed bets can hasten the market’s climb.

Analysts also say money managers are afraid of missing out on a continued rally.

“There is so much cash still on the sidelines,” said David Darst, chief investment strategist at Morgan Stanley Smith Barney. “People missed it and they’re beginning to worry that the train isn’t going to come back for them.”

On Friday, the Dow rose 23.95, or 0.3 percent, to 9,093.24, its highest finish since Nov. 5. The S&P; 500 Index rose 2.97, or 0.3 percent, to 979.26. It has risen 100 points in the two-week rally and is up 45 percent since it hit a 12-year low March 9.

The Nasdaq fell 7.64, or 0.4 percent, to 1,965.96, taken down by the selling in tech stocks. The Nasdaq broke a 12-day winning streak, but it’s still up 24.7 percent for the year, far outpacing gains in the Dow and S&P.;

It’s not just professional traders making all the moves. Individual investors also are withdrawing money from some safe corners of the market where the returns are low. In the week that ended Tuesday, money market mutual fund investors pulled $3.99 billion from taxable funds, according to according to iMoneyNet Inc, which has been flowing into stock and bond funds.

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