Despite the return of US economic growth, Wall Street was in no mood to celebrate as it braced for a Federal Reserve interest rate decision and crucial monthly labor data in the week ahead.
“Volatility is clearly on the increase as markets attempt to digest what appear to be contradictory signals on the economy,” Brian Bethune and Nigel Gault, economists at IHS Global Insight, said in a client note.
After a slight dip the previous week, the blue-chip Dow Jones Industrial Average slid 2.6 percent over the week to finish Friday at 9,712.73.
The tech-heavy NASDAQ composite index plunged a sharp 5.1 percent to 2,045.11 over the week, while the broad-market Standard & Poor’s index gave back 4 percent at 1,036.19.
The major indices on Friday remained stuck in negative territory from the opening bell, a day after the steep rally had snapped four consecutive sessions of losses.
The downtrend followed the market’s 14-month high in the middle of last month, when the blue-chip Dow topped the psychological barrier of 10,000 points.
Though the Dow ended last month with its eighth consecutive monthly gain, the other two indices posted their first monthly drop since February.
“We are getting increasingly the sentiment expressed by investors that there are a lot of gains that have been generated this year after a dreadful 2008,” said Craig Peckham, an analyst with Jefferies, a US securities and investment banking group.
“That led to a fair amount of performance protection. We have not seen a great deal of willingness after this big rally to commit more capital to stocks,” he said.
Many analysts have pointed out that the market appeared overextended after the Dow rose more than 50 percent since its early March lows.
Spirits were only temporarily lifted after the US government reported on Thursday that GDP rose a stronger-than-expected 3.5 percent at an annual rate in the third quarter, after a year of contractions.
The news sparked the strongest single-session Dow rally since July, with blue-chips up 2.05 percent, but the euphoria quickly faded amid worries about the sustainability of GDP growth once emergency government support is withdrawn, despite a series of better-than-expected company earnings reports.
The Federal Reserve’s policymaking committee, the Federal Open Market Committee (FOMC), meets on Tuesday and Wednesday. The FOMC is widely expected to keep the Fed’s base interest rate target at an historic low of zero to 0.25 percent to help stimulate growth.
All eyes will be fixed on the FOMC rate decision to be announced on Wednesday and the accompanying statement, which will be pored over for signals on the direction of monetary policy as the economy emerges from recession that began in December 2007. Markets will also be focused on similar meetings of the European Central Bank and the Bank of England.
Bonds benefited from stock market weakness. The yield on the 10-year Treasury bond fell to 3.392 percent from 3.475 percent a week earlier and that on the 30-year bond dropped to 4.236 percent from 4.289 percent.
Bond yields and prices move in opposite directions.
Wall Street ended the week gripped by speculation that embattled CIT Group, a major lender to small and medium-sized businesses, would likely file for bankruptcy protection over the weekend.
Next week’s hefty macroeconomic calendar concludes with the closely watched monthly labor market report for last month.
The US unemployment rate rose to a 26-year high of 9.8 percent in September.
“There is a great deal of concern at this late stage of the year with where we are with jobs because the next two months are all about the consumer,” Marc Pado at Cantor Fitzgerald said. “Will they have the confidence to shop for the holidays?”
The calendar includes data on construction spending and the ISM manufacturing index tomorrow and industrial orders and the ISM services index on Tuesday.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat