The latest easy-money pledges by the US Federal Reserve have carried many stocks higher, but this week’s performance by equities was not a comprehensive victory.
While two of the three main indices again closed the week higher, the tech-rich NASDAQ Composite Index came into focus following disappointing earnings results from Intel Corp, Microsoft Corp and other tech companies.
The NASDAQ closed at 3,587.61, down 12.47 (0.35 percent) from a week ago. By contrast, the Dow Jones Industrial Average rose 79.44 (0.51 percent) to 15,543.74 over the course of the week and the broad-based S&P 500 did even better, adding 11.90 (0.7 percent) to 1,692.09.
The NASDAQ losses capped a week that gave investors plenty to cheer. While the news was heavy with economic indicators and corporate earnings, Fed Chairman Ben Bernanke took center stage with dual midweek appearances before US congressional panels.
Bernanke’s testimony followed recent remarks that had cast a long shadow over global markets: a June 19 press conference in which Bernanke seemed to suggest an end of the Fed’s aggressive bond-buying program was imminent and comments earlier this month that stressed the Fed would only scale back the program if the US economy continues to improve.
Equities markets swooned and bond yields surged on Bernanke’s first appearance, while stocks soared on the latter.
This time, the markets did neither. The Fed chairman hewed close to the script of continued monetary accommodation, promising that there was “no preset” course on tapering the bond purchases and that the central bank would condition any shifts on economic data.
The message is “much clearer,” Lazard Capital Markets managing director Art Hogan said.
“Neutral is good,” Hogan said of the market’s muted reaction. “To have him come out and be benign to the market is I think a big positive.”
Hogan rated the stream of economic data, which included a bullish reading on Philadelphia manufacturing activity, as “more good than bad.” Although retail sales and housing starts were weaker than forecast, the reports appeared to be one-off disappointments and not indicative of a trend, he added.
Markets were also cheered by the bulk of the earnings reports last week. Many banking stocks surged after financial giants like Bank of America Corp, Morgan Stanley and Citigroup Inc reported large profit increases. While consumer loans continued to show weakness, some of the bank results showed a pick-up in corporate loans. That was a sign of an improving economy, FTN Financial chief economist Chris Low said.
Reports from industrial companies, including Dow member General Electric Co (GE), also gave the market a reason to smile. GE shares surged 4.6 percent on Friday after chief executive Jeff Immelt described “strong growth” in the US and said Europe is “stabilizing, but still challenged.”
However, disappointing results from some leading technology companies pushed the NASDAQ into negative territory on Friday and generated concerns about firms exposed to the declining PC market.
The market hammered Microsoft, which fell 11.4 percent after the company missed earnings forecasts and announced a US$900 million charge on its Surface tablet, where sales missed expectations.
Advanced Micro Devices also sank 13.2 percent after the chip maker reported a loss of US$0.10 per share instead of the US$0.2 loss projected by Wall Street.
With a comparatively light schedule of economic reports next week, investors will key in on earnings. Several major companies report next week, including Apple Inc, McDonald’s Corp, Boeing Co, General Motors and Caterpillar Inc.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
RESHAPING COMMERCE: Major industrialized economies accepted 15 percent duties on their products, while charges on items from Mexico, Canada and China are even bigger US President Donald Trump has unveiled a slew of new tariffs that boosted the average US rate on goods from across the world, forging ahead with his turbulent effort to reshape international commerce. The baseline rates for many trading partners remain unchanged at 10 percent from the duties Trump imposed in April, easing the worst fears of investors after the president had previously said they could double. Yet his move to raise tariffs on some Canadian goods to 35 percent threatens to inject fresh tensions into an already strained relationship, while nations such as Switzerland and New Zealand also saw increased