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MSN Money: Dow 16,000 Anyone?

Thursday, 11 Jul 2013 11:41 AM

By John Morgan

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It may be time soon to ring the bell for Dow 16,000 — there are reasons to believe the June stock slump is over and a new leg up is under way, according to MSN Money.

The June stock washout looks done, and fresh economic data gives reason for optimism, MSN Money noted.

To begin with, last week's jobs report was stronger than expected, with more than 200,000 positions added even as hourly earnings rose 2 percent. Researchers at Capital Economics "are wondering is this has become a 'job-full' recovery in a reversal of the fast-growth/slow-jobs 'jobless' recovery we've gotten used to," MSN Money reported.

Video: Economist Predicts 'Unthinkable' for 2013 

Labor's share of business income has fallen in recent years, while corporate profits hit record highs, but that trend should ease now with good economic benefits in the wings.

Further, the recent rise in interest rates has not had a dampening effect on two crucial growing sectors of the economy — housing and autos.

"Homebuying will beget more price gains, which will beget more homebuying as people try to get in front of further price rises and interest rate increases," MSN Money stated.

Auto sales grew by 4.3 percent in June and there is plenty of pent-up demand yet to be met, according to MSN Money.

Other positive economic factors listed by MSN Money, including that state and local governments are boosting construction and hiring at the fastest pace since 2008, Japanese manufacturing is expanding and sentiment in Europe is improving.

MSN said rising interest rates and a tapering of Federal Reserve monetary stimulus could eventually threaten the stock market, but in the meantime: "Get those Dow 16,000 hats on."

The Dow Jones Industrial Average was trading at 15,411 in late-morning trading Thursday.

MarketWatch columnist John Prestbo agreed U.S. stocks still have further room to rise after a stellar first half of 2013.

Based on the Dow's past performance history, Prestbo suggested there should be more follow-on gains — albeit weaker ones — ahead into the end of 2013 considering the average finished up 13.8 percent through June 30.

Even with slower corporate profits and exports, Prestbo said the U.S economy "seems to get a little stronger each month. As long as unemployment keeps ebbing and consumers keep spending, the Dow could keep out of the red in the second half of the year."

Video: Economist Predicts 'Unthinkable' for 2013

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