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but the euphoria quickly faded amid worries about the sustainability of GDP growth once emergency government support is withdrawn, despite a series of better-than-expected company earnings reports.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.
Japan has deployed long-range missiles in a southwestern region near China, the Japanese defense minister said yesterday, at a time when ties with Beijing are at their lowest in recent years. The missiles were installed in Kumamoto in the southern region of Kyushu, as Japan is attempting to shore up its military capacity as China steps up naval activity in the East China Sea. “Standoff defense capabilities enable us to counter the threat of enemy forces attempting to invade our country ... while ensuring the safety of our personnel,” Japanese Minister of Defense Shinjiro Koizumi said. “This is an extremely important initiative for
MORE POPULAR: Taiwan Pass sales increased by 59 percent during the first quarter compared with the same period last year, the Tourism Administration said The Tourism Administration yesterday said that it has streamlined the Taiwan Pass, with two versions available for purchase beginning today. The tourism agency has made the pass available to international tourists since 2024, allowing them to access the high-speed rail, Taiwan Railway Corp services, four MRT systems and four Taiwan Tourist Shuttles. Previously, five types of Taiwan Pass were available, but some tourists have said that the offerings were too complicated. The agency said only two types of Taiwan Pass would be available, starting from a three-day pass with the high-speed rail and a three-day pass with Taiwan Railway Corp. The former costs NT$2,800
POLLS CONCERNS: There are concerns within the KMT that a Cheng Li-wun-Xi Jinping meeting could trigger a voter backlash in elections in November Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) accepted an invitation from Chinese President Xi Jinping (習近平) to visit next month, her party and Chinese state media reported yesterday. Cheng, who took up her role in November last year, “gladly accepted” the invitation to lead a delegation to China, the KMT said in a statement, confirming a Xinhua news agency report. Cheng “looks forward to joint efforts by both parties to advance the peaceful development of cross-strait relations, promote cross-strait exchanges and cooperation, and work for peace in the Taiwan Strait and greater well-being for people on both sides,” the statement said. Chinese
SIGNIFICANT TO THE WORLD: The delegation’s visit aims to send a clear message that bipartisan support for Taiwan is consistent, US Senator Jeanne Shaheen said The US Senate’s bipartisan support for Taiwan remains strong and Taiwan-US ties would continue for decades to come, a US Senate delegation said in Taipei yesterday, while calling on the legislature to swiftly pass a special defense budget bill. A US delegation led by Democratic US Senator Jeanne Shaheen and Republican US Senator John Curtis — both members of the US Senate Committee on Foreign Relations — arrived in Taiwan yesterday for a two-day visit. The other senators of the delegation included Senate Taiwan Caucus cochair Thom Tillis and Senate Committee on Armed Services senior member Jacky Rosen. Shaheen told a news
RSS