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“Sun Worldwide”, the Asian-based investment boutique broker believes that the rally in the Dow Jones Industrial Average which saw the index surge through 9000 for the first time since January 2009, is likely to erase gains in the days ahead as investors come to terms with the fact that positive earnings results from financials and key Dow Jones components owe more to their prowess in cost-cutting than their ability to generate more revenue.
An unnamed “Sun Worldwide” source suggested that there was very little in the way of strong fundamental news to support the rally and it was likely that the surge in equity values included a significant level of short covering.
Positive data released by the National Association of Realtors showed that sales of existing homes rose for the third month in a row and this helped fuel speculation that the recession may be coming to an end.
The “Sun Worldwide” added that worsening US unemployment figures would have a dampening effect on house prices as further bank foreclosures inevitably increased supply of unsold inventory and held prices down.
He concluded that the general consensus as “Sun Worldwide” was that the equity markets were getting ahead of themselves. The firm is expected to advise clients to sell into strength with a view to re-entering the market on the next pullback.
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