After Stocks Hit 2016 Highs Are They on 'Borrowed Time'?

http://www.thestreet.com/story/13513923/1/after-stocks-hit-2016-highs-are-they-on-borrowed-time.html?puc=yahoo&cm_ven=YAHOO

U.S. stocks hit their highest level of the year on Wednesday, but one analyst questioned the sustainability of this rally.

"I think we are living on borrowed time," said Jasper Lawler, a market analyst with CMC Markets, based in London. He added that fears over China's yuan and an aggressive Federal Reserve have subsided, making it difficult to see what the next catalyst for stocks is.

Lawler said if the dollar stays low, stocks can withstand another fall in oil prices, which could come around the time of the next OPEC meeting.

The U.S. dollar is set to post its steepest quarterly drop in five years. "Fed Chair Janet Yellen is the top dog in the Fed and she's a dove," he said. "She doesn't want to get too aggressive on monetary policy." Even if the labor market and inflation improve in the U.S., he said, there now seems to be a  recognition of global growth in the Fed's policy. If global conditions remain turbulent, that could keep the Fed on the sidelines for longer.Global growth worries and "financial market volatility are two factors that will keep the Fed in a very shallow path of rate hikes going forward, and that should keep the dollar down," Lawler added.

The S&P 500 has gained 1% for the year. The Dow Jones Industrial Average has added 1.7% year to date, while the tech-heavy Nasdaq has lost 2.6%.

Investors now await the March jobs report, which will be released on Friday morning from the Bureau of Labor Statistics. Economists expect nonfarm payrolls to rise by 210,000 during the month, compared to the 242,000 jobs created in February. Downward revisions could come to the prior months.

"The real important number is wage growth," Lawler said, which will also be revealed in Friday's report. "I think this could be the first month that we actually see a more sensible wage number that gives us a better picture of the U.S. economy than the previous two."

Lawler said January's 0.5% rise in wages was attributed to increases in the minimum wage. Wage increases then lost steam in February, which saw a 0.1% decline as the effects from higher minimum wages faded, he said. Analysts expect March's average hourly earnings to rise by 0.2%.