An ugly start for the stock market this year suggests Wall Street sees a worsening economic picture ahead as housing and credit problems spread and potentially lead to recession, analysts say.
The blue-chip Dow Jones Industrial Average tumbled 4.2 percent in the week to Friday to 12,800.18, slipping below the psychologically important level of 13,000.
The tech-dominated NASDAQ composite plunged 6.3 percent for the week to 2,504.65 and the broad-market Standard & Poor's 500 index lost 4.5 percent to 1,411.63.
The market has opened the year with a thud, with sharp losses in two of the first three trading days, pushing the blue-chip index below 13,000 as analysts downgrade their outlook for the US economy and corporate earnings.
"We enter the new year with US data that indicate the US economy is on shaky ground," said TD Bank Financial Group economist Pascal Gauthier, predicting "a significant slowdown" in consumer spending as Americans are hit by housing and credit woes.
"A mild US recession is coming," said a more emphatic Richard Berner, economist at Morgan Stanley. "We expect domestic demand to contract significantly in each of the next three quarters, essentially no growth in overall GDP for the year ending in the third quarter of 2008 and corporate earnings to contract by five to 10 percent over that period."
Reinforcing those expectations was Friday's weak report on US employment, showing just 18,000 jobs created last month and the first contraction in private sector employment since 2003.
"Rising unemployment rates, slowing job growth, weakening manufacturing are signs of an economy just hanging on," said Joel Naroff of Naroff Economic Advisors.
Nigel Gault, economist at Global Insight, said the payrolls report "shows an economy slowing sharply -- the first quarter of 2008 is shaping up as a negative quarter for GDP growth -- and the risk of recession is rising sharply."
Gault and others say the US Federal Reserve, which has already cut its base federal funds rate by a full percentage point since September, will need to cut further and even that may not avoid a downturn.
Sal Guatieri, senior economist at BMO Capital Markets, said that resurgent inflation might prevent the Federal Reserve from easing interest rates even in the face of soft economic conditions.
"There's a strong whiff of stagflation -- weakening growth and rising inflation -- in the air for the first time since the oil price spike and recession of the early 1990s," he said.
Bonds showed strong gains as investors flocked to safety. The yield on the 10-year Treasury bond slid to 3.854 percent from 4.096 percent a week earlier while that on the 30-year Treasury bond slipped to 4.359 percent from 4.514 percent.
PROTECTION: The investigation, which takes aim at exporters such as Canada, Germany and Brazil, came days after Trump unveiled tariff hikes on steel and aluminum products US President Donald Trump on Saturday ordered a probe into potential tariffs on lumber imports — a move threatening to stoke trade tensions — while also pushing for a domestic supply boost. Trump signed an executive order instructing US Secretary of Commerce Howard Lutnick to begin an investigation “to determine the effects on the national security of imports of timber, lumber and their derivative products.” The study might result in new tariffs being imposed, which would pile on top of existing levies. The investigation takes aim at exporters like Canada, Germany and Brazil, with White House officials earlier accusing these economies of
Teleperformance SE, the largest call-center operator in the world, is rolling out an artificial intelligence (AI) system that softens English-speaking Indian workers’ accents in real time in a move the company claims would make them more understandable. The technology, called accent translation, coupled with background noise cancelation, is being deployed in call centers in India, where workers provide customer support to some of Teleperformance’s international clients. The company provides outsourced customer support and content moderation to global companies including Apple Inc, ByteDance Ltd’s (字節跳動) TikTok and Samsung Electronics Co Ltd. “When you have an Indian agent on the line, sometimes it’s hard
‘SACRED MOUNTAIN’: The chipmaker can form joint ventures abroad, except in China, but like other firms, it needs government approval for large investments Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) needs government permission for any overseas joint ventures (JVs), but there are no restrictions on making the most advanced chips overseas other than for China, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. US media have said that TSMC, the world’s largest contract chipmaker and a major supplier to companies such as Apple Inc and Nvidia Corp, has been in talks for a stake in Intel Corp. Neither company has confirmed the talks, but US President Donald Trump has accused Taiwan of taking away the US’ semiconductor business and said he wants the industry back
PROBE CONTINUES: Those accused falsely represented that the chips would not be transferred to a person other than the authorized end users, court papers said Singapore charged three men with fraud in a case local media have linked to the movement of Nvidia’s advanced chips from the city-state to Chinese artificial intelligence (AI) firm DeepSeek (深度求索). The US is investigating if DeepSeek, the Chinese company whose AI model’s performance rocked the tech world in January, has been using US chips that are not allowed to be shipped to China, Reuters reported earlier. The Singapore case is part of a broader police investigation of 22 individuals and companies suspected of false representation, amid concerns that organized AI chip smuggling to China has been tracked out of nations such
RSS