After a week of eye-popping gains, Wall Street is pondering whether the rebound from a vicious sell-off points to a real recovery from the economic and financial turmoil or a new “bear trap.”
Markets appear to have come to terms with the notion of a recession in the US and global economies, but the key question for traders now is whether the heavy doses of medicine from governments around the world will lead to quick recovery.
The coming week, however, will be marked by the US presidential election on Tuesday and key data, particularly from the struggling auto sector.
The Dow Jones Industrial Average showed a stunning rebound of 11.29 percent for the week, the best since 1998, led by Monday’s 10 percent surge.
But that failed to make up for the panic selling of earlier in the month, leaving the blue-chip index down a hefty 14 percent for last month and nearly 30 percent for the year.
The broad-market Standard & Poor’s 500 index vaulted 10.49 percent on the week to 968.75, but fell 17 percent last month. The technology-heavy NASDAQ composite advanced 10.88 percent to 1,720.95, but lost 18 percent in the month.
The strong gains still left the market deep in the red after one of the ugliest months in Wall Street history.
“Investors were pricing in a very severe recession, if not depression, and right now we’re going through a relief rally,” Standard & Poor’s analyst Sam Stovall said.
“Investors feel that stock prices might have overdone it to the downside,” he said.
Joachim Fels at Morgan Stanley said authorities in the US and elsewhere are taking the aggressive actions needed to stem the crisis, including interest rate cuts and moves to pump vast amounts of liquidity into the financial system.
“In our view, even highly unorthodox measures such as zero interest rates, direct central bank lending to the private sector, heavy government interference with private banks’ lending policies or large-scale bank nationalizations cannot be excluded,” Fels said.
“In short, we believe that the authorities will do whatever it takes to prevent a depression,” he said.
“While a global recession appears unavoidable, we believe that markets have gone too far in pricing in a multi-year deflationary outcome,” Fels said.
Christine Li at Economy.com said markets were more focused on central bank actions to cut rates around the world, on top of a variety of initiatives to ease a global credit squeeze.
Bonds fell over the week as investors appeared to take a bit more risk.
The yield on the 10-year Treasury bond rose to 3.970 percent from 3.697 percent a week earlier, and that on the 30-year bond increased to 4.369 percent against 4.087 percent. Bond yields and prices move in opposite directions.
Tropical Storm Gaemi strengthened into a typhoon at 2pm yesterday, and could make landfall in Yilan County tomorrow, the Central Weather Administration (CWA) said yesterday. The agency was scheduled to issue a sea warning at 11:30pm yesterday, and could issue a land warning later today. Gaemi was moving north-northwest at 4kph, carrying maximum sustained winds near its center of up to 118.8kph and gusts of 154.8kph. The circumference is forecast to reach eastern Taiwan tomorrow morning, with the center making landfall in Yilan County later that night before departing from the north coast, CWA weather forecaster Kuan Shin-ping (官欣平) said yesterday. Uncertainty remains and
SEA WARNING LIKELY: The storm, named Gaemi, could become a moderate typhoon on Wednesday or Thursday, with the Taipei City Government preparing for flooding A tropical depression east of the Philippines developed into a tropical storm named Gaemi at 2pm yesterday, and was moving toward eastern Taiwan, the Central Weather Administration (CWA) said. Gaemi could begin to affect Taiwan proper on Tuesday, lasting until Friday, and could develop into a moderate typhoon on Wednesday or Thursday, it said. A sea warning for Gaemi could be issued as early as Tuesday morning, it added. Gaemi, the third tropical storm in the Pacific Ocean this typhoon season, is projected to begin moving northwest today, and be closest to Taiwan on Wednesday or Thursday, the agency said. Today, there would likely
DISRUPTIONS: The high-speed rail is to operate as normal, while several airlines either canceled flights or announced early departures or late arrivals Schools and offices in 15 cities and counties are to be closed today due to Typhoon Gaemi, local governments announced last night. The 15 are: Taipei, New Taipei City, Taoyuan, Tainan, Keelung, Hsinchu and Kaohsiung, as well as Yilan, Hualien, Hsinchu, Miaoli, Chiayi, Pingtung, Penghu and Lienchiang counties. People should brace for torrential rainfall brought by the storm, with its center forecast to make landfall on the east coast between tonight and tomorrow morning, the Central Weather Administration (CWA) said. The agency issued a sea warning for the typhoon at 11:30pm on Monday, followed by a land warning at 11:30am yesterday. As of
CASUALTY: A 70-year-old woman was killed by a falling tree in Kaohsiung as the premier warned all government agencies to remain on high alert for the next 24 hours Schools and offices nationwide are to be closed for a second day today as Typhoon Gaemi crosses over the nation, bringing torrential rain and whipping winds. Gaemi was forecast to make landfall late last night. From Tuesday night, its outer band brought substantial rainfall and strong winds to the nation. As of 6:15pm last night, the typhoon’s center was 20km southeast of Hualien County, Central Weather Administration (CWA) data showed. It was moving at 19kph and had a radius of 250km. As of 3pm yesterday, one woman had died, while 58 people were injured, the Central Emergency Operation Center said. The 70-year-old