Wall Street heads into the Christmas week on a merry note with fears abating about a widening financial crisis and a potential recession in the world's biggest economy.
Despite persistent worries about a credit squeeze that could choke off economic growth, the main stock indexes posted healthy gains in the week before Christmas.
The Dow Jones Industrial Average climbed 0.85 percent for the week to Friday to 13,450.65 and the broad market Standard & Poor's 500 advanced 1.1 percent to 1,484.46.
The technology-heavy NASDAQ composite rallied 2.1 percent to 2,691.99.
With three full trading sessions left for this year and shortened trading days tomorrow and on Dec. 31, the Dow is holding a gain for the year of 7.9 percent, with the S&P up 4.7 percent and NASDAQ 11.5 percent.
Some analysts say the market could build on those gains around the holidays in the so-called Santa Claus rally effect.
"It has been observed by the Stock Trader's Almanac that the period covering the last five trading days of a year and the first two trading days of the new year often produces a respectable rally," Jeffrey Ham at Briefing.com said.
Volatile trading in the past few months has been marked by worries that the crises that began with a meltdown in housing and spread to the banking and finance sector would drag the overall economy lower.
But data in recent days suggests US consumer spending, which accounts for two-thirds of economic activity, is holding firm. That along with rising exports may keep the US economy above water, some analysts say. One report showed consumer spending up a solid 1.1 percent last month.
"December data should confirm that the US isn't in recession, or at least wasn't as of the fourth quarter," said Avery Shenfeld, senior economist at CIBC World Markets.
"Look for the tone for much of the coming month to be set by the employment data, given that job growth is now the key bulwark against recession," Shenfeld said.
Citigroup economist Robert DiClemente said recession talk is still prominent but that a downturn may be averted if the US Federal Reserve plays its cards right after cutting rates by a full percentage point since September.
"There are reasons to be optimistic that the economy will muddle through this mess with continued help from policy," he said.
"We expect the Fed to continue cutting rates by at least 75 basis points in coming months and that these actions will provide a measure of financial stability sufficient to quarantine the remaining drag from housing and its spillover."
Sherry Cooper, chief economist at BMO Capital Markets, is more worried, saying that credit is drying up in the banking system and that central banks such as the Fed have done too little too late, leaving the US and other economies at risk.
"The US housing collapse has already frozen financial markets and raised the cost of capital for all but triple-A rated governments, generating enormous losses at financial institutions of all sorts," she said.
"My sense is the prospects of US recession are rising fast and the next pipedream to burst will be the theoretical decoupling of the emerging economies from troubles in the US economy."
Bond prices rose in the week. The yield on the 10-year Treasury bond eased to 4.168 percent from 4.232 percent a week earlier, and that on the 30-year Treasury fell to 4.575 percent from 4.658 percent. Bond prices and yields move in opposite directions.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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