Was possible US recession exaggerated?

“People are less afraid,” said Gregori Volokhine, president of Meeschaert Capital Markets.

NEW YORK: US stock markets closed last Friday with their best weekly gain in nearly two months, rebounding as investors rethought the odds of a new recession and a flicker of optimism returned to Wall Street.

The Dow Jones Industrial Average gained 4.32% for the week, closing at 11,284.54. However, it is still down about more than 11% from its summertime peak in late July.

The broader S&P 500 rallied 4.74% for the week to close at 1,176.80 last Friday, while the tech-heavy Nasdaq Composite surged 5.89% to 2,479.85.

Markets had fallen for the past four weeks amid fears that the United States could be slipping into another economic slowdown, aggravated by concerns about fallout from the eurozone's sovereign debt crisis.

“People are less afraid,” said Gregori Volokhine, president of Meeschaert Capital Markets.

“They realised that the risks of a recession had maybe been exaggerated, since recession is not the same as 1% growth, but a contraction,” Volokhine added.

The US economy grew at a sluggish 1.0% pace in the second quarter, according to revised data released last Friday.

But Federal Reserve chairman Ben Bernanke, in a highly anticipated speech, said he expected growth to pick up speed in the second half of this year, helping reassure the markets.

Early this week, markets will try to gauge the impact of Hurricane Irene, which is expected to cause billions of dollars in damage as it slams into the east coast of the United States last weekend.

The New York Stock Exchange is planning to remain open today (Monday), although its building is just blocks away from low-lying areas of Manhattan that have been ordered to be evacuated ahead of the storm.

Later in the week, investors will focus on some key economic data releases, including the Institute for Supply Management's index on the health of the US manufacturing sector, to be published on Thursday.

This Friday, the release of the official unemployment rate for August will provide insight into whether the deeply depressed US labor market is showing any signs of recovery.

“What we need is good news in the employment side of things, but there is a chance we might not get good news,” said Hugh Johnson, of Hugh Johnson Advisors.

“It's too soon to celebrate.” AFP