US stocks managed to chalk up back-to-back weeks of gains for the first time in 10 months after the US Federal Reserve provided an unexpected boost to sentiment with an aggressive move to pump up liquidity.
But with investors locking in profits on Friday amid waning enthusiasm over the central bank’s decision to inject another US$1 trillion into the financial system to prop up the economy, analysts said the market was expected to remain cautious.
Over the week, the Dow Jones Industrial Average of 30 blue-chips added 0.75 percent to end at 7,278.38 — the first back-to-back weekly gains since May last year — despite two consecutive solid days of red ink on on Thursday and Friday.
The technology-heavy NASDAQ composite rose 1.8 percent to 1,457.27, while the broad-market Standard & Poor’s 500 Index was up 1.58 percent to 768.54 for the week.
“As the market has already experienced two periods of panic selling — late November and early March — we believe the downside risk is limited,” Wachovia Securities chief market strategist Al Goldman said amid increasing investor optimism about the global economy.
Investors are at their most optimistic about the global economy since December 2005, according to the Merrill Lynch Survey of Fund Managers for this month, although a prolonged banking crisis seems to be stopping them from putting cash into equities.
US share prices rose the past week after fresh data showed new US home construction and building permits saw a surprise jump last month from 50-year low levels in a positive sign for the moribund home market at the epicenter of the global financial crisis.
The market turned more buoyant after US Federal Reserve Chairman Ben Bernanke made a surprise announcement on Wednesday on buying up to US$300 billion in Treasury bonds and an additional US$850 billion in other debt in a bid to cut lending costs and fire up the sluggish economy.
But the enthusiasm died down by the end of the week as investors feared that the move carried a huge inflation risk as the more than US$1 trillion in new money might have to be paid for one way or the other, through taxes or higher inflation.
“One conclusion is that the Fed is simply printing money to provide liquidity. By definition this action is always inflationary,” Fred Dickson of DA Davidson & Co said. “What remains to be seen is how long it will take to show up in the prices consumers and businesses pay for goods.”
Although the market is not expecting any bombshells the coming week, it may have to contend with some weak economic numbers.
“We are expecting, however, another string of dismal economic reports,” IHS Global Insight economists said in a report.
They said all indicators pointed to another plunge in existing home sales for last month even if new home sales could stage a modest rebound from an all-time low in January.
A US economic contraction, at 6.2 percent the last quarter, could also be revised to show an even larger drop, the IHS Global Insight report said, forecasting 6.7 percent against an analysts consensus of 6.6 percent.
PLA MANEUVERS: Although Beijing has yet to formally announce military drills, its coast guard vessels have been spotted near and around Taiwan since Friday The Taiwanese military is on high alert and is closely monitoring the Chinese People’s Liberation Army’s (PLA) air and naval deployments after Beijing yesterday reserved seven airspace areas east of its Zhejiang and Fujian provinces through Wednesday. Beijing’s action was perceived as a precursor to a potential third “Joint Sword” military exercise, which national security experts said the PLA could launch following President William Lai’s (賴清德) state visits to the nation’s three Pacific allies and stopovers in Hawaii and Guam last week. Unlike the Joint Sword military exercises in May and October, when Beijing provided detailed information about the affected areas, it
CHINA: The activities come amid speculation that Beijing might launch military exercises in response to Lai’s recent visit to Pacific allies The Ministry of National Defense (MND) yesterday said China had nearly doubled the number of its warships operating around the nation in the previous 24 hours, ahead of what security sources expect would be a new round of war games. China’s military activities come amid speculation Beijing might organize military drills around the nation in response to President William Lai’s (賴清德) recent visit to Pacific allies, including stops in Hawaii and Guam, a US territory. Lai returned from the week-long trip on Friday night. Beijing has held two rounds of war games around Taiwan this year, and sends ships and military planes
Five flights have been arranged to help nearly 2,000 Taiwanese tourists return home from Okinawa after being stranded due to cruise ship maintenance issues, the Ministry of Transportation and Communications announced yesterday. China Airlines Ltd (中華航空), and EVA Airways Corp (長榮航空) have arranged five flights with a total of 748 additional seats to transport 1,857 passengers from the MSC Bellissima back to Taiwan, the ministry said. The flights have been scheduled for yesterday and today by the Civil Aviation Administration, with the cruise operator covering all associated costs. The MSC Bellissima, carrying 4,341 passengers, departed from Keelung on Wednesday last week for Okinawa,
China is deploying its largest navy fleet in regional waters in nearly three decades, posing a threat to Taiwan that is more pronounced than previous Chinese war games, the Ministry of National Defense said today. Speaking in Taipei, ministry spokesperson Sun Li-fang (孫立方) said the scale of the current Chinese naval deployment in an area running from the southern Japanese islands down into the South China Sea was the largest since China held war games around Taiwan ahead of 1996 Taiwanese presidential elections. China's military has yet to comment and has not confirmed it is carrying out any exercises. "The current scale is
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