after poor retail data

Wall Street experienced another choppy week of trading and with stocks relatively steady on Friday, the major benchmarks were poised for one of their better weeks since the squeeze in the credit and money markets emerged in mid-July.

This relative calm coupled with light trading volumes came before the Federal Reserve meeting and third quarter earnings results from leading investment banks next week. The better mood in stocks reflected hopes that a policy easing next week would prevent financial market stress infecting the broader economy, say analysts.

A record low in the dollar against the euro and a record high in crude oil did not derail stocks this week. Sluggish retail sales data on Friday, on the heels of a weak employment report the previous week, have reinforced expectations that policy-makers will ease rates at least a quarter-percentage point on Tuesday.

"A rate cut will certainly make the markets feel the Fed is with them," said Jack Ablin, chief investment officer at Harris Private Bank.

At midday, the S&P 500 index was steady around 1,483.61, for a rise of 2.1 per cent this week. The S&P has now rebounded more than 5 per cent from its mid-August low of 1,406.70 when credit concerns intensified. That leaves the benchmark just over 4 per cent below its record close of 1,553 from mid-July.

"The rhetoric from Wall Street is for a rate cut, but if you watch what they have done, the leadership seen in stocks reflects expectations of a better economy, not a crisis," said Jim Paulsen, chief investment strategist at Wells Capital Management.

Although energy stocks led the S&P's major sectors higher, retailers and financials also rebounded smartly this week. Technology, which had done well in prior weeks, lagged in recent days.

Homebuilders also underperformed. This group has now fallen more than two-thirds from its peak in 2005.

At midday, the Nasdaq Composite was unchanged at 2,601.02, but had risen 1.4 per cent since Monday.

The weak dollar helped boost the appeal of large multinational companies, such as those in the technology sector, and the Nasdaq 100 index was up 2.2 per cent this week, outpacing the Composite.

Among big technology stocks, Apple rose 5.3 per cent to $138.38 as it announced the sale of 1m iPhones. UBS raised its price estimate to $182.

The Dow Jones Industrial Average was a fraction higher on Friday at 13,426.83, and had gained 2.4 per cent over the week. This was the Dow's best week since a rise of 2.8 per cent for the week ending April 20.

A number of Dow stocks surged this week. McDonald's rallied 10.5 per cent to $54.80 and set a record high of $54.95 yesterday. The fast food group announced a 50 per cent increase in its annual cash dividend to $1.50 a share after posting a 8.1 per cent rise in global same-store sales during August.

Boeing rose 4.6 per cent to $99.17, as the aircraft maker announced it had won a $1.1bn US Air Force deal.

As oil entered record territory, Exxon Mobilgained 4.2 per cent to $89.43.

JPMorgan, a Dow banking stock, rallied 4.6 per cent to $45.55 as investors continued to discriminate among financials.

The S&P Financials sector rose 2.4 per cent this week, reversing some of the 5 per cent loss in the preceding two weeks. The S&P Investment bank index rose 5.2 per cent, its best weekly performance since mid-April, and had largely repaired the damage of the previous two weeks.

Among the brokerages, Lehman outperformed with a rise of 10.9 per cent to $58.71. Bear Stearnsrallied 9.9 per cent to $115.75 and steadily accrued gains from Monday, when a filing revealed that wealthy financier Joseph Lewis was the investment bank's single largest shareholder after a stake-building that began two months ago.

Attention will now focus on sector earnings. "The major investment banks, namely Lehman, Bear, and Goldman report and undoubtedly will help set the tone for stocks and help gauge why damage was done over the last few months," said David Ader, bond strategist at RBS GreenwichCapital.

Countrywide, the largest US mortgage lender, plunged early this week and touched a low of $16.18 as fears over its ability to secure financing intensified. On Thursday, the bank said it has secured $12bn in financing and the stock rose 14 per cent, and was up a further 2 per cent to $19.30 on Friday. (Financial Times)