Wall Street limped to the end of what appears to be a positive quarter in the past week amid doubts about whether the economy can rebound and the market can keep upward momentum in the second half of the year.
With the year’s midpoint coming up, a key for stocks in the holiday-shortened week ahead will be Thursday’s report on US unemployment and payrolls, which comes a day early with US markets closed for Friday’s Independence Day celebration.
The report is seen as one of the best indicators of economic momentum and could provide clues about the timing and strength of a rebound from the worst recession in decades.
The blue-chip Dow Jones Industrial Average dropped 1.2 percent to 8,438.39 in the week to Friday, a second weekly drop after a four-week winning streak.
The technology-heavy NASDAQ rose 0.59 percent on the week to 1,838.22 while the broad-market Standard & Poor’s 500 index declined 0.25 percent to 918.90.
Many say that despite the lackluster week, the market is sensing that the US and global economies will soon come out of their deep slump, yet some of that has already been reflected in the 40 percent jump in the broad indexes since March.
Mark Luschini, chief investment strategist at Janney Montgomery Scott, said there was some trepidation about how far the rally can run, with the S&P index still up some 35 percent from its March lows.
“The dilemma amongst market participants at the moment relates to whether the weakness was merely the stock market taking a well-deserved breather or did it warn of something more sinister,” he said.
“On one hand, the rally germinated from improving news on the economic front and confidence returning to the financial markets ... On the other hand, the ‘green shoots’ metaphor is a tad worn at this juncture and the market’s budding skepticism is based on the need to realize actual good news rather than advancing on news that is just comparatively less bad,” Luschini said.
The US Federal Reserve calmed some nerves over the past week as it made no change in its near-zero interest rate policy and signaled it would keep its stimulus efforts on track without pulling back or expanding the effort.
The announced extension of key lending programs put into place to counter the credit crisis appeared to generate confidence.
“By extending its lending facilities into next year, the Federal Reserve sent a strong message to financial markets on Thursday that interest rates will remain unchanged for the foreseeable future,” Ryan Sweet at Moody’s Economy.com said.
Nariman Behravesh, chief economist at IHS Global Insight, said there was growing evidence the worldwide slump is ending.
“The light at the end of the tunnel is shining a little brighter,” he said. “The world economy will begin its recovery in the second half of 2009 as the global inventory correction winds down. The timing and speed of regional recoveries will vary, with Asia leading, the United States coincident, and much of Europe lagging behind.”
But analysts say Thursday’s payrolls report could be a key for the economy and the stock market.
Bonds rose as inflation fears ebbed. The yield on the 10-year Treasury bond dropped to 3.506 percent from 3.789 percent a week earlier and that on the 30-year bond declined to 4.303 percent from 4.522 percent. Bond yields and prices move in opposite directions.
The coming week also features data on monthly US auto sales, consumer confidence and a purchasing managers’ index on the manufacturing sector.
BACK IN THE NEIGHBORHOOD: The planned transit by the ‘Baden-Wuerttemberg’ and the ‘Frankfurt am Main’ would be the German Navy’s first passage since 2002 Two German warships are set to pass through the Taiwan Strait in the middle of this month, becoming the first German naval vessels to do so in 22 years, Der Spiegel reported on Saturday. Reuters last month reported that the warships, the frigate Baden-Wuerttemberg and the replenishment ship Frankfurt am Main, were awaiting orders from Berlin to sail the Strait, prompting a rebuke to Germany from Beijing. Der Spiegel cited unspecified sources as saying Beijing would not be formally notified of the German ships’ passage to emphasize that Berlin views the trip as normal. The German Federal Ministry of Defense declined to comment. While
‘UPHOLDING PEACE’: Taiwan’s foreign minister thanked the US Congress for using a ‘creative and effective way’ to deter Chinese military aggression toward the nation The US House of Representatives on Monday passed the Taiwan Conflict Deterrence Act, aimed at deterring Chinese aggression toward Taiwan by threatening to publish information about Chinese Communist Party (CCP) officials’ “illicit” financial assets if Beijing were to attack. The act would also “restrict financial services for certain immediate family of such officials,” the text of the legislation says. The bill was introduced in January last year by US representatives French Hill and Brad Sherman. After remarks from several members, it passed unanimously. “If China chooses to attack the free people of Taiwan, [the bill] requires the Treasury secretary to publish the illicit
A senior US military official yesterday warned his Chinese counterpart against Beijing’s “dangerous” moves in the South China Sea during the first talks of their kind between the commanders. Washington and Beijing remain at odds on issues from trade to the status of Taiwan and China’s increasingly assertive approach in disputed maritime regions, but they have sought to re-establish regular military-to-military talks in a bid to prevent flashpoint disputes from spinning out of control. Samuel Paparo, commander of the US Indo-Pacific Command, and Wu Yanan (吳亞男), head of the People’s Liberation Army (PLA) Southern Theater Command, talked via videoconference. Paparo “underscored the importance
CHINA POLICY: At the seventh US-EU Dialogue on China, the two sides issued strong support for Taiwan and condemned China’s actions in the South China Sea The US and EU issued a joint statement on Wednesday supporting Taiwan’s international participation, notably omitting the “one China” policy in a departure from previous similar statements, following high-level talks on China and the Indo-Pacific region. The statement also urged China to show restraint in the Taiwan Strait. US Deputy Secretary of State Kurt Campbell and European External Action Service Secretary-General Stefano Sannino cochaired the seventh US-EU Dialogue on China and the sixth US-EU Indo-Pacific Consultations from Monday to Tuesday. Since the Indo-Pacific consultations were launched in 2021, references to the “one China” policy have appeared in every statement apart from the