Graphics shows U.S. stocks rise after a choppy session on November 30, 2009, as investors tried to digest mixed data on consumer spending in this year's holiday shopping season. (Xinhua/Qu Zhendong)
NEW YORK, Nov. 30 (Xinhua) -- The U.S. equity market ended November with its best monthly advance since July, even as investors worried about the consumer spending during the holiday season and Dubai World's debt crisis.
The Dow rose by 632 points, or 6.5 percent, in November, its fifth straight monthly gain. The S&P 500 index added 5.7 percent in November as it rebounded from the first monthly decline since reaching a 12-year low in March and the Nasdaq rose 4.9 percent.
The dollar's weakness has been a big driver behind higher stock prices for months, as the relationship between moves in the dollar and stocks has been incredibly tight.
Commodities are traded in dollars, so a weak dollar pushes the price of commodities higher. Strengthening in the commodities market further uplifts shares of energy and materials producers.
Gold prices, for instance, soared to a record above 1,180 U.S. dollars an ounce on the back of weak greenback on Nov. 25 before plunging amid Dubai debt fears two days later.
Moreover, a batch of better-than-expected economic data also played a role in the market rally. Areas like housing and labor market showed moderate improvement during the month.
The U.S. Labor Department posted that the number of newly laid-off workers filing claims for unemployment benefits fell more than expected in the week ended on Nov. 21 to the lowest level in over a year. And the number of workers receiving benefits also fell to the lowest level since February.
And a report from the Commerce Department showed purchases of new homes rose 6.2 percent in October, much better than the 0.5 percent increase economists had expected.
In addition, Theodore Weisberg, a trader with Seaport Securities on the New York Stock Exchange, indicated that the recent growth of the stock market was partially driven by traders. He said "We have many retail investors and they hesitate to come back to the market, because we still have a lot of uncertainties."
As a matter of fact, investors have been battling mixed signals on the economy in recent months. Although the housing market is stabilizing, others like manufacturing are still lagging. Investors also concerned that the big improvement in the labor market will be temporary as the weak economy continues to push unemployment higher.
Investors have talked for months their bets on an economic recovery over the past eight months may have been overdone, as the Standard & Poor's 500 index is up over 60 percent since early March. And some worried that there's a stock bubble.
Statistics from the National Retail Federation, a trade group, indicated that more consumers went shopping over the Thanksgiving holiday weekend, yet spent less than last year as they hunted for bargains on toys and electronics, a sign that a rebound of consumer spending might be sluggish.
Moreover, Dubai's debt crisis unveiled on Nov. 27 reminded investors that the global economic recovery is not a plain sailing. Dubai World, which is wholly owned by the government, requested for a standstill agreement with creditors and threw doubt on 59 billion U.S. dollars of liabilities.
Investors were anxious about the possibility that a default by Dubai could touch off a new round of lending problems even as credit markets are still recovering from last year's near-meltdown following the collapse of Lehman Brothers.
However, Theodore predicted the market is likely to continuously move forward, as investors who have missed the huge rally since March are closely watching and seeking buying opportunities.
"I think we are far from the bubble phase. I think the sell-offis buying opportunity, not selling opportunity. If we think in terms of where stocks were a year ago and where they are now, there is still a lot of value", said Theodore.
And some analysts pointed out that record-low interest rates are leaving even hesitant investors with few options for generating decent returns, so they keep buying stocks although they're wary about whether the market can keep rising.
Therefore, as the end of the year approaches, some investors who missed out on the eight-month rally that began in March are looking for opportunities to get in, creating a possibility of continuous equity gains in December.
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