US investors gird for fresh turmoil in coming week

NEW YORK (AFP) - US investors are girding for fresh stock turmoil in the coming week after riding a market roller-coaster in recent days, which has shaken their confidence in the mortgage and credit markets.

The major US stock market indexes ended the week higher Friday that a week ago, but investors saw their portfolios whiplashed as uncertainty about the troubled US housing sector and a related credit squeeze swept world markets.

The leading Dow Jones Industrial Average has dived and jumped by over 200 points in recent days, investors have fled mortgage related investments, and the Federal Reserve has injected tens of billions of dollars into the financial system to shore up confidence.

The blue-chip Dow gained 0.44 percent for the week to end Friday at 13,239.54, following a 0.63 percent decline in the prior week and an over four percent drop in the week before that.

The broad-market Standard & Poor's 500 rose a more substantial 1.44 percent over the week to 1,453.64.

The tech-rich Nasdaq composite increased 1.34 percent on the week to Friday to finish lower at 2,544.89.

Despite the end-of-week gains, analysts said fresh Fed interventions could be required in coming days if the markets display renewed volatility and credit problems.

"Central banks are doing the right thing, they're adding liquidity to a system that needs it and they will continue to do so until it doesn't need it.

"It's part of the process to get out of the credit crunch and financial turmoil," said Art Hogan, an analyst at Jefferies and Co.

The US central bank pumped 38 billion dollars into the financial system on Friday in move which some analysts said helped bolster sentiment.

While much of the past week's focus was on the stock market and mortgage and credit sectors, economic news is likely to grab more headlines in coming days.

"Next week, it's all about the economy. We have a lot of economic news coming out. If the economic news remains on the positive side, that could alleviate some of the fears that the economy might be headed to slower growth," said Peter Cardillo, an analyst at Avalon Partners.

Despite the market jitters, growth in the US economy accelerated to a 3.4 percent annualized pace in the second quarter, up from a 0.6 percent crawl in the first three months of the year.

However, some economists believe the housing downturn, which started over a year ago, and growing fears about the mortgage market could spill over into the wider economy.

A government report on housing starts next Thursday will likely stimulate interest.

Most economists expect housing starts to slow to 1.41 million in July compared with 1.47 million in the prior month as homebuilders cut back on new developments.

Investors will get an update on retail sales Monday with most analysts anticipating a rebound in activity. Sales are forecast to rise 0.2 percent in July compared with a 0.9 percent decline in the prior month.

Such a rebound, or a stronger than expected report, would likely help restore some confidence, market watchers said.

They also warned that further trading dips could lay ahead.

"As we have been saying for the last month, keep your seat belts and shoulder harnesses fastened. The ride will remain rough," said Frederic Dickson, an equity analyst at DA Davidson.

Bond prices fell in the week to Friday.

The yield on the 10-year US Treasury bond rose to 4.776 percent from 4.700 percent a week earlier. The 30-year bond yield jumped to 5.005 percent from 4.867 percent. Bond yields and prices move in opposite directions.