International markets: New York - US stocks to keep on climbing

US STOCKS are expected to keep climbing this week - as investors watch for the Dow to reach a new 10,000 milestone - while bond investors say 30-year Treasury yields may be headed to record lows after a surprise drop in March employment and Moody's Investors Service cut its outlook on Japan's debt to "negative".

"A yield of 5.5 per cent is possible by the end of June," said David Jallits, manager at Strategic Fixed-Income in Virginia. Yields fell on Friday to 5.79 per cent.

Although the rise of stocks is making some nervous, investors were glad to see the Dow Jones cross 9,000 on Friday and see it going higher. "If we hit 10,000 on the Dow," said Christopher Beck, a money manager at Delaware Management, "the only thing that would stop it is if something out of the blue happens or the Fed tightens."

The latter became unlikely in the past week. The Federal Reserve left interest rates unchanged, and unemployment jumped. The fewer people working, the less inflation, leaving the central bank little reason to tighten the money supply.

That just leaves "something out of the blue". The most likely surprise would come from corporate earnings for the first quarter, which are starting to be announced. "The danger is probably a little higher than is reflected in the market," Beck said. "We've had more companies with earnings warnings than we've seen in the past few quarters. But investors are betting on them not continuing."

But the profit alerts have not been much worse than in the past. They have just seemed bad, because they involved high-profile companies such as Intel and Tyson Foods, said Chuck Hill, research director at First Call, which tracks earnings. "If you look at the plain numbers, there's nothing unusual," he said.

Still, analysts are not expecting much profit among the Standard & Poor's 500 companies, which they say will earn just 0.5 per cent more for the first quarter than they did a year earlier. With the profit outlook so weak, why would investors see more gains in stocks?

They are looking beyond this quarter to the rest of the year, when earnings are projected to increase by as much as a 15.6 per cent in the fourth quarter from a year earlier. "The economy is not having the degree of softness that everybody thought it would have, slowing down from Asia," said Ben Hock, head of equity research at John Hancock Funds.

For the week, the Dow average rose 2.1 per cent. The Standard & Poor's 500 Index rose 2.4 per cent. "We're going to see some bad volatility, but we're going to see that concentrated in two areas, energy and technology. If you take those two areas out, we're doing well," Mr Hock said.

Copyright: IOS & Bloomberg