Wall Street is struggling with renewed fears about the economic outlook and at the same time feeling a chill from a tougher stand from the White House on banks and financial market regulation.
The market was hammered over the past week by worries about the US outlook and trouble in China, where an overheating economy may prompt a credit squeeze that hurts the rest of the global economy.
Also hurting the mood was a tough proposal from US President Barack Obama to curb the size and scope of banks, and growing opposition to US Federal Reserve Chairman Ben Bernanke’s renomination.
In the coming week, markets will deal with the outcome of a Federal Reserve policy meeting, as well as the drama surrounding the Bernanke confirmation. A slew of earnings reports are also expected.
On the economic front, data is expected to show a strong gain in US economic activity in the fourth quarter, but analysts say the figures will likely be skewed by a bounce in inventory activity.
Over the holiday-shortened week, the Dow Jones Industrial Average tumbled 4.12 percent to 10,172.98, in a sharp pullback from 15-month highs.
The tech-rich NASDAQ composite sank 3.61 percent to 2,205.29 the broad Standard & Poor’s 500 index slumped 3.90 percent to 1,091.76.
The recent volatility “is a reflection of how much uncertainty that continues to swirl with respect to the economic landscape and the shape that financial market regulation will take,” said Diana Petramala, economist at TD Bank Financial Group.
Petramala said the markets were roiled by the proposals by Obama to cap the size and scope of bank activity, a plan unveiled after the White House called for a new tax on big financial institutions.
“There is still a question mark around what the future holds for the US banking sector,” she said.
“Adding to investor angst this week was the notion that a global recovery could be slower than expected,” especially with China appearing to be moving to cool activity, she said.
Petramala said data on Thursday on US gross domestic product could show a strong growth rate in the economy of 5 percent, but cautioned that “over half of the bounce in economic activity looks to have been due to a large inventory swing and not to sustainable economic drivers.”
Despite the renewed skittishness, some analysts said Wall Street is seeing an overdue correction, which could take some of the speculative froth out of the market and set the stage for more gains.
“The market seems to want to take a breather, so it found negative spin this week,” said Linda Duessel at Federated Investors.
“At a moment when most everyone is looking for a correction, there probably shouldn’t be a serious one,” she said.
Bob Dickey at RBC Wealth Management said traders have been using the current corporate earnings season to lock in profits, after having pushed up the market in anticipation of positive profit reports.
“The market continues to trade in its backward fashion of pulling back on the good news of so many companies beating their fourth quarter earnings expectations,” Dickey said.
This phenomenon “can help to explain why the market has rallied so strongly over the past nine months and is now giving some back in the face of apparent good news,” he said.
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