A year after the Wall Street calamity that battered the financial system and dragged the global economy into recession, investors appear to have regained their composure and are betting on recovery.
The main US indexes nearly recovered most of the losses that followed the panicked events of last September, which froze up financial markets and kept stocks on a downward track until March.
“Investors are increasingly convinced that a sustainable global recovery is emerging out of the wreckage,” said Albert Edwards, analyst at Societe Generale.
Over the week to Friday, the Dow Jones Industrial Average climbed 1.74 percent to 9,605.41, after touching an 11-month high earlier in the week.
The tech-heavy NASDAQ composite rallied 3.08 percent to 2,080.90 and the broad-market Standard & Poor’s 500 index jumped 2.59 percent to 1,042.73.
Despite the latest rebound, the main indexes are still well below their historic highs.
The blue-chip Dow is 32 percent below its all-time high of October 2007 of 14,164.53 and the S&P 500 some 33 percent short of its record of the same day of 1,565.15. The NASDAQ remains at less than half the level of the tech bubble high of 5,048.62.
This gives ammunition to both bulls and bears, fueling debate on how much further the market can run after a surge of some 50 percent from lows in early March.
“The question at this stage of the stock market advance is, if we’re in a recovery, how strong can it be?” Linda Duessel at Federated Investors said. “We very well may have a V-shaped recovery, a catalyst for the S&P 500 reaching 1,200.”
Others are less sanguine.
“People are optimistic about the third quarter, but still questioning how much is being driven by [the government] stimulus and how much is really organic, real growth that’s sustainable,” says Marc Pado, analyst at Cantor Fitzgerald.
David Rosenberg, chief economist at Gluskin Sheff & Associates and a longtime bear, says he sees “a hope-based rally in the equity markets” that flies in the face of economic fundamentals.
“What we are seeing transpire is without precedent — the magnitude of the employment slide versus the magnitude of the market advance,” he said. “The fundamentals take a back seat because there is so much liquidity to be put to work, and it all must go into equities. This reminds us of all the liquidity talk during the bubble peak of late 2007.”
Bonds rallied for the week. The yield on the 10-year Treasury bond dropped to 3.342 percent from 3.442 percent a week earlier while that on the 30-year bond declined to 4.175 percent from 4.273 percent. Bond yields and prices move in opposite directions.
In the coming week, investors will mark the one-year anniversary of the Lehman Brothers collapse that sent markets reeling. Also on tap are reports on inflation, retail sales, housing starts and industrial production.
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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