As caution creeps back into Wall Street, investors have pulled back to consolidate recent hefty gains amid questions about whether stocks have hit their peak for this year.
Losses in the past week came after a historic rally of some 50 percent for the broad market, but also amid jitters about the “September effect,” reflecting a historical trend of a weak period and last year’s market calamity in September.
Going into the US Labor Day holiday weekend, the blue-chip Dow Jones Industrial Average fell 1.18 percent for the week to end at 9.441.27.
The technology-heavy NASDAQ composite dipped 0.49 percent to 2,018.78 and the broad-market Standard & Poor’s 500 index pulled back 1.22 percent to 1,016.40.
With the broad market still up around 50 percent from lows in early March, some analysts argue that stocks have risen too far too fast over the past six months.
David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates, said the market appears to be entering a new phase, having shifted its view from a contracting economy to one that is growing again.
“For months, the equity market had this uncanny ability to rally on any good news, as the psychology took hold that less-negative data was a positive,” Rosenberg said.
“But having gone from pricing in a drop of 2.5 percent in real GDP at the lows to a rise of 4.0 percent now, it looks like Mr Market is becoming a little more discerning in terms of interpreting the economic data,” he said.
Doug Kass at Seabreeze Partners recently argued that stocks had hit their highs for the year in late August, saying that the bull market was “in complacency,” as “optimism and a boisterous enthusiasm reigns.”
But others contend that the market, which remains more than 30 percent below peaks of 2007, can resume its upward track after a pause to consolidate.
Fred Dickson, chief market strategist at DA Davidson & Co, said he expects the S&P index to gain another 5 percent this year amid an improving economy.
“Over the next three months we are looking for the stock market to experience a series of minor rallies followed by short, shallow dips as investors continue to look for even slight pullbacks to raise equity exposure,” he said.
The market struggled to interpret the past week’s biggest economic news, showing a loss of 216,000 jobs as the US unemployment rate hit a fresh 26-year high of 9.7 percent.
While this was better than expected and showed some healing in the economy, it failed to inspire confidence in a strong economic rebound.
“All indications are that US real GDP growth will turn positive again during the third quarter of this year, but the recession lives on in the labor market,” Meny Grauman at CIBC World Markets said.
Brian Wesbury at First Trust Portfolios said the data suggests the economy is quickly gaining momentum after a brutal recession.
Dean Maki at Barclays Capital also sees an economy that will surprise to the upside.
“The economic data continue to reinforce our forecast of a solid recovery, pointing to robust growth in manufacturing output, housing, and real exports, and we expect these forces to propel a substantial rebound in growth over the next year,” he said.
Bonds were mixed for the week. The yield on the 10-year Treasury bonds fell to 3.442 percent Friday from 3.451 percent a week earlier and that on the 30-year bond rose to 4.273 percent from 4.208 percent. Bond yields and prices move in opposite directions.
The economic calendar is light in the holiday-shortened week opening on Tuesday. The market will receive the Federal Reserve Beige Book survey on the US economy and data on the US trade balance.
STILL COMMITTED: The US opposes any forced change to the ‘status quo’ in the Strait, but also does not seek conflict, US Secretary of State Marco Rubio said US President Donald Trump’s administration released US$5.3 billion in previously frozen foreign aid, including US$870 million in security exemptions for programs in Taiwan, a list of exemptions reviewed by Reuters showed. Trump ordered a 90-day pause on foreign aid shortly after taking office on Jan. 20, halting funding for everything from programs that fight starvation and deadly diseases to providing shelters for millions of displaced people across the globe. US Secretary of State Marco Rubio, who has said that all foreign assistance must align with Trump’s “America First” priorities, issued waivers late last month on military aid to Israel and Egypt, the
France’s nuclear-powered aircraft carrier and accompanying warships were in the Philippines yesterday after holding combat drills with Philippine forces in the disputed South China Sea in a show of firepower that would likely antagonize China. The Charles de Gaulle on Friday docked at Subic Bay, a former US naval base northwest of Manila, for a break after more than two months of deployment in the Indo-Pacific region. The French carrier engaged with security allies for contingency readiness and to promote regional security, including with Philippine forces, navy ships and fighter jets. They held anti-submarine warfare drills and aerial combat training on Friday in
COMBAT READINESS: The military is reviewing weaponry, personnel resources, and mobilization and recovery forces to adjust defense strategies, the defense minister said The military has released a photograph of Minister of National Defense Wellington Koo (顧立雄) appearing to sit beside a US general during the annual Han Kuang military exercises on Friday last week in a historic first. In the photo, Koo, who was presiding over the drills with high-level officers, appears to be sitting next to US Marine Corps Major General Jay Bargeron, the director of strategic planning and policy of the US Indo-Pacific Command, although only Bargeron’s name tag is visible in the seat as “J5 Maj General.” It is the first time the military has released a photo of an active
CHANGE OF MIND: The Chinese crew at first showed a willingness to cooperate, but later regretted that when the ship arrived at the port and refused to enter Togolese Republic-registered Chinese freighter Hong Tai (宏泰號) and its crew have been detained on suspicion of deliberately damaging a submarine cable connecting Taiwan proper and Penghu County, the Coast Guard Administration said in a statement yesterday. The case would be subject to a “national security-level investigation” by the Tainan District Prosecutors’ Office, it added. The administration said that it had been monitoring the ship since 7:10pm on Saturday when it appeared to be loitering in waters about 6 nautical miles (11km) northwest of Tainan’s Chiang Chun Fishing Port, adding that the ship’s location was about 0.5 nautical miles north of the No.
RSS