US stocks erase collapse, edge into positive territory

After weeks of wild swings and dismal trading, U.S. stocks have reached a place that many feared may be impossible this year: home base.

The Dow Jones industrial average, which tracks 30 blue-chip stocks, and the Standard & Poor's 500-stock index, a broader view of the market, both completed a slow slog into positive territory this week erasing a nearly 10 percent collapse in prices that had sparked concerns of a year-long plunge into volatility that would wipe out trillions of dollars in investor wealth.

Investors have become immune to some of the triggers that sparked panic early in the year and are clinging to positive economic signs, market analysts said. The price of oil, once lumbering below $30 a barrel, is now above $40 a barrel. Concerns that China's economic slowdown would seep into the rest of the global economy and destabilize the United States have waned. And the Federal Reserve this week left a key interest rate unchanged, giving investors confidence that the central bank would not be withdrawing support for the U.S. economy too quickly.

"We are nearly flat on the year. That is actually a big victory for investors. It's a

huge deal," said Peter Kenny, senior market strategist for the Global Markets Advisory Group. "U.S. equities have managed to dig themselves out of a very big hole."

The Dow is up nearly 1 percent for the year, while the S&P is up about .4 percent.

But investors may not be out of the woods yet. The Nasdaq is still down about 4 percent this year as investors remain skeptical of tech. Some analysts are also fearful that U.S. companies will report weak first quarter earnings, serving up another reason to fear that the economy is weaker than it appears. Besides, some say, presidential election years are typically volatile as investors adjust their views based on the polls.

"I think the real test is earnings season, which begins in April," said Jack Ablin, chief investment officer of BMO Private Bank. "It will force investors to come face to face with lackluster earnings and revenues. We'll see how we fare."

And there are also still warning signs in the IPO market. Only seven companies have gone public this year compared with 28 in the same period last year, according to Renaissance Capital, a manager of IPO-focused electronic traded funds.

And in many cases, the companies that have gone public have received substantial help from the venture capitalists and other insiders that helped fund them while they were private companies. Insiders typically own about 22 percent of a company's public shares after an IPO, but that has reached 46 percent this year, according to Renaissance.

"These aren't really public companies," said Kathleen Smith, a principal at Renaissance Capital. Given the heavy participation of insiders, it is difficult to determine the true value of a company.

When Editas Medicine, a startup gene editing biotech, became the first IPO of 2016 on Feb. 3, it was good news for its heavy-hitting roster of investors, including Bill Gates, Google and Fidelity Investments. Its stock, which has traded widely since its IPO, ranging from $13 to $42 a share, is now up more than 50 percent this year.

This story was originally published March 18, 2016 at 11:29 PM with the headline "US stocks erase collapse, edge into positive territory ."