Stock markets around the globe closed higher on Friday as markets assessed positive economic data out of the US and additional progress was seen in solving the European debt crisis. Most of the macro economic data out of the US came in the form of Industrial Production figures and sentiment surveys but all of the data pointed in the positive direction and investors took this as a reason to push stock prices higher.
The S&P 500 is now trading at some very critical long term levels with the yearly highs at 1420 not coming into view. But given this proximity to the yearly highs, investors will have to make some critical decisions next week, and this will determine whether or not the latest rallies are based on true investor optimism or just low liquidity levels that are typically seen during the summer months.
Tech Stocks Seen as Some of the Star Performers
Last week’s rally in stocks was widespread across the major sectors but there was some particularly strong performances in the tech sectors with Apple (AAPL) and Cisco Systems (CSCO) two of the most notable stories. Apple stock rose by nearly 4.5% during the week to trade just below the $650 price level, giving the company a total valuation above $600 billion. This is an all time high for the company’s valuations, as the company maintains its position as the most valuable company in the world.
A good part of this rally is coming from analyst reports which suggest that tablet sales are expected to overtake the sales of personal computers before 2015, and Apple is well-positioned to benefit from these trends relative to most of its competition. Apple also plans to introduce a smaller version of its iPad tablet, in order to raise its profile within the industry. Reports of new TV products are also being viewed as supportive of the company’s stock price.
Cisco: One Week’s Biggest Gainers
The other major tech story was seen in Cisco Systems, which rose by nearly 9% during the week (the biggest weekly period gain in 3 years), propelled in part by proposed job cuts but also as a result of the strong corporate earnings report that was released during the week. The latest rise in profits came mostly as a result of stronger sales figures, which were seen well above the consensus analyst estimates.
Looking Ahead to Next Week
Moving forward, market direction will be largely dictated by the strength of next week’s US economic data. Most of these numbers are centered on the real estate market, so we will need to see some particularly strong numbers in order to see these latest rallies extend themselves. Housing data tends to have a more limited effect on general stock prices, however, so we could very well see some range trading next week as investors assess the validity of the latest market gains.