Wall Street ended its weekly trade with sharp losses as fears of a second-dip recession struck traders’ hearts after negative data suggested a bleak outlook for the world’s biggest economy.
Friday’s trade locked four days of straight losses fueled by the US Federal Reserve’s decision on Tuesday to revive crisis-era stimulus spending to prop up the ailing US economy, whose recovery, it warned, was slowing down.
In what was the worst trading week in six weeks, the Dow Jones Industrial Average lost 3.29 percent to 10,303.15, while the technology-rich NASDAQ composite index shed 5.02 percent to 2,173.48.
The broader S&P 500 index dropped 3.78 percent to 1.079.25.
The Federal Open Market Committee (FOMC) said on Tuesday that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.”
The Fed also said it would maintain its historically low interest rates between zero and 0.25 percent, but FOMC member Thomas Hoenig warned on Friday that current interest rate levels were “a dangerous gamble.”
The bank had battled the worst recession in a generation by buying up US debt, mortgage-backed securities and other financial products to lubricate markets.
The grim outlook was deepened by reports showing an unexpected rise in weekly jobless claims and that the US trade gap had widened sharply in June to its highest level in 20 months.
Figures suggesting a slowdown in the Chinese economy further compounded fears about the pace of the global recovery from the worst recession in decades.
Positive earnings reports from entertainment giant Walt Disney and department store chains Macy’s and Kohl’s failed to improve gloomy sentiments on Wall Street.
Shares in Cisco Systems took a heavy beating, pulling the NASDAQ down, as it lost more than 11 percent over the past week alone, after the Internet communications giant reported a disappointing profit and issued a cautious forecast.
“Early in the week, the market was hit by a one-two punch of a gloomier than expected FOMC report as well as weaker than expected data from China,” said Sam Stovall, an analyst at Standard and Poor’s. “In general, people are worried that the macro economic data is now overtaking the euphoria that we had gotten from second quarter earnings.”
Next week is likely to continue the low-volume trade with the monthly producer price index and industrial production reports set to show a timid improvement from the previous month, Stovall said.
Eyes will also be focused on the housing market with the release of the housing market index tomorrow and the housing starts reports on Tuesday, as investors seek to feel the market pulse.
“We’re basically scratching our heads ... but I would tend to say that economic reports next week will probably be more encouraging than the other way around,” Stovall said.
Furthermore, several companies will release their quarterly results, including the world’s largest retailer Walmart and PC manufacturer Dell, which seeks to recover from a volatile week affected by low forecasts in the global computer market.
A Chinese freighter that allegedly snapped an undersea cable linking Taiwan proper to Penghu County is suspected of being owned by a Chinese state-run company and had docked at the ports of Kaohsiung and Keelung for three months using different names. On Tuesday last week, the Togo-flagged freighter Hong Tai 58 (宏泰58號) and its Chinese crew were detained after the Taipei-Penghu No. 3 submarine cable was severed. When the Coast Guard Administration (CGA) first attempted to detain the ship on grounds of possible sabotage, its crew said the ship’s name was Hong Tai 168, although the Automatic Identification System (AIS)
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.
An Akizuki-class destroyer last month made the first-ever solo transit of a Japan Maritime Self-Defense Force ship through the Taiwan Strait, Japanese government officials with knowledge of the matter said yesterday. The JS Akizuki carried out a north-to-south transit through the Taiwan Strait on Feb. 5 as it sailed to the South China Sea to participate in a joint exercise with US, Australian and Philippine forces that day. The Japanese destroyer JS Sazanami in September last year made the Japan Maritime Self-Defense Force’s first-ever transit through the Taiwan Strait, but it was joined by vessels from New Zealand and Australia,
COORDINATION, ASSURANCE: Separately, representatives reintroduced a bill that asks the state department to review guidelines on how the US engages with Taiwan US senators on Tuesday introduced the Taiwan travel and tourism coordination act, which they said would bolster bilateral travel and cooperation. The bill, proposed by US senators Marsha Blackburn and Brian Schatz, seeks to establish “robust security screenings for those traveling to the US from Asia, open new markets for American industry, and strengthen the economic partnership between the US and Taiwan,” they said in a statement. “Travel and tourism play a crucial role in a nation’s economic security,” but Taiwan faces “pressure and coercion from the Chinese Communist Party [CCP]” in this sector, the statement said. As Taiwan is a “vital trading
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