After Modest Gains, Is Wall Street Ready To Break Out Of Rut?

NEW YORK, Sept 10 (AFP) - Wall Street posted modest gains over the past week, offering some hope the stock market can break out of the narrow trading range of the past eight months.
In the holiday-shortened week to Friday, the blue-chip Dow Jones Industrial Average advanced 0.51 percent to 10,313.07 and the Standard and Poor's 500 broad-market index added 0.92 percent to 1,123.92.
The tech-heavy Nasdaq composite meanwhile rallied 2.7 percent for the four sessions to close at 1,894.31.
Despite the gains of the past few weeks, investors have been frustrated because the market has been holding in a narrow range over the past eight months after digesting 2003's strong gains.
"Something has to give at some point, because this is one of the longest pauses the market has turned in over the past two decades -- directionless now for 207 days," said David Rosenberg at Merrill Lynch.
Ralph Acampora at Wachovia Securities said the market may be ready to resume its upward trend after a long period of churning.
"We have been in the camp of those calling for this frustrating eight-month trading range to be nothing more than an intermediate term correction in a cyclical bull market," he said.
John Hughes, market analyst at Shields and Co., agreed that a bit more churning may set the stage for the Dow to break above 10,400 and improve the mood on Wall Street.
"If we break above this level it really changes the whole complexion of the year so far to what we perceive as much more positive," Hughes said.
"If you just trade around up here in these very narrow ranges for a couple of weeks you're going to work off all that overbought situation and all that buying that was built up and you're going to create an opportunity without any significant pullback."
But RBC Dain Rauscher analyst Bob Dickey said the stock market shows no sign of breaking out out of its trading range.
"There is still no trend to this market, and little indication of what may be developing now that the summer months are behind us," Dickey said.
"We are stuck with the greater likelihood that the same sideways trend of the past eight months will likely continue."
The market has been able to weather the impact of high oil prices and less-than-spectacular economic data. But Federal Reserve Chairman Alan Greenspan said the economy is "gaining traction," fueling hopes that the news will get better.
Peter Cardillo at SW Bach said if oil prices hold in check, stocks could gather momentum.
"Next week we have a lot on the plate," he said, including a series of economic reports and a meeting of the OPEC cartel. "We could see a rally."
Sung Won Sohn at Wells Fargo Bank said stocks are not out of the woods yet.
"The worries over interest rates, geopolitics and the uncertainties surrounding the election continue to be a heavy burden on equities," Sohn said.
"If Chairman Greenspan is right, the economy is out of the soft patch and should grow at a healthy pace, boosting corporate earnings ... Improvements in geopolitical uncertainties and economic outlook should boost equity prices at least temporarily."
Bonds strengthened on data showing tame inflation and modest growth, which takes pressure off the Federal Reserve to lift interest rates.
The yield on the 10-year US Treasury bond fell to 4.199 percent from 4.293 a week earlier and that on the 30-year bond to 4.971 percent against 5.061 percent. Bond yields and prices move in opposite directions.