Central bank watch on Wall St this week

Wall Street seems destined to push to fresh highs again this week as investors continue to bet on both an improving economic outlook and a solid commitment from the US Federal Reserve to counter any weakness.

On Friday, the Dow Jones industrial average rose 0.80 per cent to close at a record 15,354.40, while the Standard & Poor's 500 Index added 0.95 per cent to finish at a record 1,666.12. The Nasdaq Composite Index gained 0.97 per cent to end at 3,498.97, its highest close in more than 12 years.

JPMorgan raised its year-end target for the S&P 500 to 1,715 from 1,580, implying a gain of just under 3.5 per cent for the index for the rest of the year, Reuters reported.

"We realise investors are apprehensive about making fresh money purchases, but we see the risk/reward as particularly attractive in Technology, Healthcare, and Financials," said the client note from JPMorgan's US equity strategist Thomas Lee.

Despite some inconsistent economic data last week, Wall Street's upward momentum appears intact. In the past five days, the Dow gained 1.6 per cent, the S&P 500 climbed 2.1 per cent, while the Nasdaq Composite Index rose 1.8 per cent.

And for the year so far, both the Dow and the S&P 500 have added about 17 per cent, while the Nasdaq is almost 16 per cent higher.

Stronger-than-expected data on US consumer sentiment, which leapt to the highest in almost six years, and on future economic activity lifted the mood on Friday.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 83.7 in May from 76.4 in April. Separately, an index of US leading indicators rose 0.6 per cent in April.

"We are still recovering," Doreen Mogavero, CEO of Mogavero, Lee & Co in New York, told Reuters. "The US [market], for all its woes, is still the best place to be at this moment."

It's not just stocks that are benefiting from this seeming dichotomy: the US dollar is powering ever higher and commodity currencies appear destined to extend their losses. Gold also is poised to drop still further.

On the currency markets, the greenback is back in favour. "Technically, [the US] dollar's rally has been accelerating as seen in daily charts against other major currencies and we'd expect such strength to continue," according to ActionForex.com.

The price of gold may fall to US$1,100 in a year as the precious metal "is going to get crushed," Ric Deverell, head of commodities research at Credit Suisse Group, told reporters in London on Friday.

To be sure, that creates opportunity too.

"When the fundamentals are the same but the price lower, it strikes me that gold is on sale," Adrian Day, who manages about US$140 million of assets as the president of Adrian Day Asset Management, told Bloomberg.

This Wednesday will offer investors more insight on what the world's top central bankers are thinking. There's a Bank of Japan rate decision, minutes from the Bank of England and the Fed's policy committee and Fed Chairman Ben Bernanke will be giving testimony to Congress.

While the US economic calendar is light, there's a slew of PMI data from Europe with a continuing watch on the divergence between Germany and the rest of the continent.

Europe's Stoxx 600 Index gained 1.2 per cent in the past five days.

In the US, investors will be looking for signs of strength in reports on the housing market after last week's disappointing data. Existing home sales are due Wednesday, followed by the FHFA house price index and new home sales on Thursday.

Other clues on the American economy will arrive in the form of the Chicago Fed national activity index on Monday, the PMI manufacturing index flash on Thursday and durable goods orders on Friday.

Companies releasing their latest earnings this week include Hewlett-Packard, Home Depot, Lowe's, Best Buy, Target, Gap and Abercrombie & Fitch.