Sun, Nov 28, 2010 - Page 10 News List

Wall Street down after rollercoaster of a week

LIGHT IN DARKNESS?Despite volatility around the world and the Fed’s bleak economic forecast that pushed stocks down, US unemployment claims fell more than expected

AFP, NEW YORK

Wall Street lurched from gains to losses in a rollercoaster ride this week, amid concerns about the eurozone, tensions on the Korean Peninsula and amid a US holiday.

“US equity markets experienced light trade this week due to the Thanksgiving Day holiday, but that trade was volatile due to geopolitical concerns,” analysts at Briefing.com said.

The Dow Jones Industrial Average fell 1 percent for the week, while the S&P 500 was down 0.7 percent. The week’s trade was dominated by news that Ireland had agreed a US$114 billion bailout from the EU and the IMF, in the face of unsustainable borrowing costs.

The publicly vilified bailout prompted the government to call elections early next year and the fate of an accompanying package of reforms remains in the balance.

Traders initially appeared to take news of the bailout in their stride, but as concerns grew that the crisis may engulf Portugal and even Spain — one of Europe’s largest economies — traders reduced their risk exposure.

That pummeled some banks with large exposure to Europe.

Barclays’ US traded shares fell over 7 percent during the week. European banks UBS, Deutsche Bank, Credit Suisse and Royal Bank of Scotland also saw their US share price trounced.

US banks suffered less, but were not immune. Morgan Stanley shares fell 3.5 percent and Citigroup and Bank of America were also hit.

US stocks also battled against escalating tensions between North and South Korea.

In one of the most serious border incidents since the 1950s, North Korea fired dozens of shells onto or around a South Korean island near the disputed Yellow Sea border, killing four, including two South Korean marines, and setting homes ablaze.

A bleak forecast by the US Federal Reserve that the US economy would grow at a much slower pace than previously expected next year further jolted trade.

Minutes from the Fed’s monthly meeting, where members decided to renew massive asset purchasing in a bid to boost the economy, showed that growth would be about half a percentage point less than expected this year and next year.

Forecasts put forth at the meeting showed that already anemic growth predictions have been slashed to 2.4 to 2.5 percent this year and 3 to 3.6 percent in the next.

However, as consumers started ramping up for the holiday season retailers received a boost from news of increased consumer spending and an improved jobs market.

Positive news came from the jobs market, where US unemployment claims fell more than expected last week by 34,000 from the previous week to 407,000, compounding a choppy, but steady downward trend seen in recent weeks.

Another report showed US consumers earned and spent more last month, raising expectations ahead of the holiday shopping season which traditionally begins on “Black Friday” following Thursday’s Thanksgiving holiday.

The news caused the Dow to pop over 150 points up on Thursday, although many of the gains were short-lived.

The week ended with a squib on Friday as the Dow fell 95 points in a shortened day’s trade.

However, tech stocks benefited from the upbeat tone, with the NASDAQ rising 0.7 percent for the week.

Amazon was one of the major beneficiaries, with its stock rising over 7 percent. EBay shares were up almost 3 percent.

Retailers’ resilience will be tested early next week when the first results of the weekend sales are known.

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