Wall Street’s stunning two-month rally has stalled, with investors turning cautious about prospects for an early recovery from recession in the face of sluggish economic data.
The Dow Jones Industrial Average retreated 3.57 percent in the week to Friday to 8.268.64, ending a string of gains over eight of the previous nine weeks.
The tech-dominated NASDAQ shed 3.38 percent to 1,680.14 while broad-market Standard & Poor’s 500 index tumbled 4.99 percent in the week to 882.88.
While the broad US market remains up by some 30 percent from lows hit in early March, some investors are now questioning whether the rally has gone too far too fast in view of still-questionable economic news.
“Investors just don’t believe in this rally,” said Linda Duessel, equity strategist at Federated Investors. “A sustainable rally needs a reality check. We’ve been saying this rally moved too far, too fast and could use a breather. This week, it got it.”
The market was disappointed by reports over the past week showing a surprise 0.4 percent drop in US retail sales, suggesting American consumers are not yet ready to resume their spending ways in view of ongoing job losses.
“Investors were reminded this week that ‘less-bad’ doesn’t necessarily mean good,” said Sal Guatieri, economist at BMO Capital Markets. “American consumers, though emerging from their deep hibernation of late last year, are still hunkering down.”
Ed Yardeni at Yardeni Research said the market was starting to question the notion of “green shoots” that will lead to an economic recovery.
“We all want to believe that a recovery is coming. So maybe we are imagining one,” he said.
A number of reports in the past week suggested sluggish conditions, but some argue that the easing of the downturn may presage a recovery sometime soon.
“The fact that we have started seeing the silver linings in some very dark clouds tells me psychology is changing dramatically,” Joel Naroff of Naroff Economic Advisors said.
“Worries about a never-ending recession have been replaced by hopes that better times are near. Because I have been arguing that confidence is the key to ending the recession, the upswing in outlook is the most optimistic development that could have occurred,” he said.
Bonds rebounded over the past week as investors looked for safety. The yield on the 10-year US Treasury bond eased to 3.123 percent from 3.293 percent a week earlier and that on the 30-year bond dropped to 4.083 percent from 4.274 percent. Bond yields and prices move in opposite directions.
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,
US president-elect Donald Trump said he would “never say” if Washington is committed to defending Taiwan from China, but “I would prefer that they do not do it [ an attack],” adding that he has a “good relationship” with Chinese President Xi Jinping (習近平). “I never say because I have to negotiate things, right?” Trump said in an interview with NBC’s Meet the Press host Kristen Welker after saying he would not reveal his incoming administration’s stance on Taiwan’s defense in the event of an attack. Asked the question again, Trump, in a reference to China, said: “I would prefer that they
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