Market recovery gets a boost from the Fed

US stocks rallied last week and major indexes saw their biggest monthly returns in four years after the Federal Reserve's apparent endorsement of the market recovery as lasting.

The broad Standard & Poor's 500 rose 8.3 per cent in October, bringing it within 2.5 per cent of its record high. The professionals' gauge of the US market looks likely to test that record this week, as long as there are no unpleasant surprises from Facebook, steelmakers or other corporations in the last busy week of the earnings season. The other wild card is the dollar, whose strength in the wake of the Fed's reassuring statement could lead to a new market shock.

With 341 of S&P 500 corporations already accounted for, it looks as though third-quarter profits shrank 3.6 per cent, according to data from Thomson Reuters. That's skewed by the profit drought for energy and commodity companies, drained by historic drops in raw-material prices in the last 12 months. Last week, Exxon Mobil, the largest US oil company, said its third-quarter earnings had fallen by almost half. The impact of the oil crash on Exxon's bottom line was cushioned by gains at its refining business, where the integrated oil company is a buyer rather than seller of oil. That's a cushion that drillers reporting this week such as Devon Energy and Chesapeake will not have.