Wall Street stocks notched up hefty gains in the past week, setting fresh all-time highs, as investors gained confidence in the economic outlook despite mounting profit warnings from major banks.
The markets were buoyed on Friday by a monthly government report which showed improved job growth last month. The job snapshot, which showed 110,000 new jobs created last month, soothed investors fears that the economy could be facing a recession risk.
In the week to Friday, the Dow Jones Industrial Average advanced 1.21 percent to 14,066.01. The leading blue-chip index has been hovering close to a record high of 14,087.55 struck on Monday.
The broad market Standard & Poor's 500 index jumped 3.27 percent to 1,557.59, ending the week at a new record high, while the tech-laden NASDAQ soared 2.83 percent to 2,780.32.
Some analysts said the markets are still benefitting from a big cut in borrowing costs initiated by the Federal Reserve on Sept. 18 when it cuts its key federal funds short term interest rate by 0.5 percentage points to 4.75 percent.
"The market is in an uptrend," said Mace Blicksilver, a market analyst at Marblehead Asset Management. "The market is comfortable with the level of risk which is in the system."
The gains came as more banks revealed large write-downs on their market positions, particularly in mortgage-backed securities, in recent days.
Merrill Lynch & Co, Inc, a big Wall Street investment bank and brokerage, warned investors on Friday it will post a third-quarter loss because of soured bets it made on the mortgage and debt markets.
The third-quarter earnings season will start in earnest in the coming week as aluminum giant Alcoa and conglomerate General Electric reveal their latest financial results.
"Next week we'll focus mainly on the whole earnings prospects and what's going on in terms of earnings," said Marc Pado, a market analyst at Cantor Fitzgerald.
The coming week's economic diary will be relatively light, but a report on retail sales which is due to be released Friday will likely be closely watched as consumer spending accounts for some two-thirds of US economic growth.
Most economists expect retail sales for last month to strengthen to 0.5 percent, marking a gain from the 0.2 percent pace recorded in August when global markets were engulfed by a credit crunch triggered by fears over the US mortgage market.
Some analysts cautioned that corporate earnings would likely be impacted by the housing and credit woes impacting some business sectors.
"It does not appear to be a sparkling quarterly period," said Larry Wachtel, chief market analyst at Wachovia Securities.
"The comparisons will be with a strong third quarter last year, while the slowing domestic economy may slow the pace of profits. Moreover, the bottom line of many large financial companies could be impacted by the subprime [mortgage] contagion," Wachtel said.
Bond prices fell over the past week as investors shifted money into stocks.
The yield on the 10-year Treasury bond rose to 4.640 percent from 4.579 percent a week earlier, and that on the 30-year Treasury jumped to 4.871 percent against 4.833 percent. Bond prices and yields move in opposite directions.
STAYING AHEAD: Fitch said that TSMC remains technologically ahead of others, but Samsung is building a new chip fab, while China is investing in its domestic industry As escalating US-China tensions and COVID-19-related production disruptions force US technology supply chains to transform, Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) US$12 billion chip fabrication plant in Arizona would be key to spurring greater US production of core semiconductor components, Fitch Ratings said. “We view the US-TSMC alliance as a first step in building a more autonomous US technology supply chain, given high barriers to entry, specifically related to the significant capital and design capability required for leading-edge semiconductor manufacturing,” Fitch said in a statement on Tuesday. “By working with TSMC, US chipmakers will not face the financial burden of incremental investment
DIVERSIFICATION: Although COVID-19 would push more companies to produce in emerging markets, DBS said that it was unlikely that firms would totally leave China Geopolitical tensions and supply disruptions are expected to accelerate the migration of manufacturing out of China, as concerns about the risk of production concentrated in one country increase, S&P Global Ratings said. Although its economic expansion might be weaker than previous levels due to the accelerated relocation of manufacturing, China’s economic growth would still be stronger than that of most other economies, the ratings agency said. “While absolute growth rates will moderate, we believe China’s economic performance will continue to be a key sovereign credit support,” S&P Global Ratings credit analyst Tan Kim Eng (陳錦榮) said in a statement on Thursday. “Its growth
Taiwan’s corporate landscape has changed significantly over the past 20 years, with Hon Hai Precision Industry Co (鴻海精密) replacing Formosa Plastics Corp (台塑) as the revenue leader, while Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) has emerged as the most profitable firm, a survey of Taiwan’s 50 largest companies published on Tuesday last week showed. The Chinese-language CommonWealth Magazine survey ranked Taiwan’s 50 largest companies based on their revenue last year, and compared them with the results of a similar survey it conducted in 2000. Only 33 companies on the original list remained in this year’s rankings, the survey found, following two
GEOPOLITICAL RISKS: Beijing announced plans to strengthen ‘enforcement’ in Hong Kong, sparking losses across Asia led by the Hang Seng’s 5.6 percent plunge Local shares on Friday ended sharply lower amid renewed tensions between the US and China over Chinese telecommunications equipment giant Huawei Technologies Co Ltd (華為) and China’s plan to introduce a national security law in Hong Kong. The TAIEX on Friday finished down 197.16, or 1.79 percent, at 10,811.15 on turnover of NT$177.183 billion (US$5.9 billion), almost flat from a close of 10,814.92 on May 15. The market was down across all major sectors, in particular electronics shares, which finished down 1.99 percent from Thursday’s close. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest wafer foundry and a chip supplier
RSS