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Stock indices near new highs despite mixed data

Published Sun, May 18, 2014 · 10:00 PM
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LAST week, major US stock indices closed near record highs despite continued weakness for the fastest-growing companies amid disappointing economic data and mixed earnings reports. This week, traders will take their cues from the Federal Reserve's comments on Wednesday.

To some economists, the growth outlook does not seem as certain as the Fed's policy statements would suggest. Data last week prompted some to downgrade their projections for second-quarter growth. Many investors had anticipated second- quarter growth would catapult higher as consumers emerged from a long hibernation with an increased appetite for spending. There is little evidence to suggest the spring splurge materialised. Last week, the world's largest retailer by sales, Walmart, forecast a modest rebound in earnings growth in the current quarter from the winter quarter.

And, while the headline number for housing starts was positive, analysts cautioned that much of the 13 per cent increase comprised multi-family units. This statistic is often skewed by plans to build high-rise buildings in big cities. Unlike single-family homes, most high-rise buildings are not owned by their occupants and so their construction is not as closely correlated to broader growth.

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