US equity markets ended one of their poorest weeks of the year on Friday, tumbling on the back of uninspiring economic data and troubling earnings reports from Wal-Mart Stores Inc and other retailers.
The economic picture that emerged was one of tortoise-like economic growth that might add weight to those who are urging the US Federal Reserve that it is too early to scale back its bond-buying.
However, treasury bond markets appeared to conclude that the Fed would indeed soon taper the program, driven the yield on the 10-year bond up from 2.58 percent on Aug. 9 to 2.83 percent at the end of the week. The 30-year bond also rose significantly.
Analysts cited concerns about higher yields as a factor behind the week’s declines. The Dow Jones Industrial Average suffered two days of triple-digit losses, shedding 344.04 (2.23 percent) to end at 15,081.47. The broad-based S&P 500 dropped 35.59 (2.10 percent) to 1,655.83 and the tech-rich NASDAQ Composite Index ended at 3,602.78, 57.32 (1.57 percent) lower.
The NASDAQ got a lift from news that activist investor Carl Icahn took a large stake in Apple Inc and was pressing the technology icon for a large stock buyback. Apple shares closed the week 10.5 percent higher.
A busy week of economic data had a few bright spots, such as a drop in initial jobless claims, which fell to their lowest in six years.
However, most of the other indicators gave markets little reason to smile. US consumer prices increased a scant 0.2 percent last month, while US producer price data was flat during the same period. Analysts also rued weak consumer confidence and retail sales, which rose by just 0.2 percent.
“What this week did confirm is that we’re in this very modest growth, very modest inflation period,” said Scott Wren, senior equity analyst at Wells Fargo Advisors.
Adding to the unimpressive data was a spate of earnings reports from leading retailers that showed a consistently frugal global consumer.
Wal-Mart, the world’s biggest retailer, led the pack, reporting a 0.3 percent decline in comparable store sales at its US stores due to higher payroll taxes, high gasoline prices and almost non-existent inflation.
The pattern carried to other retailers, such as high-end Nordstrom Inc, which also cut its full-year forecast, and the more mid-market Kohl’s Corp and Macy’s, which missed analyst expectations.
Wren said there is little reason to think consumers will change course quickly.
“You’re not going to get through the aftermath of a gigantic credit bubble in a year or two,” he said.
Wren said he was confident that even in the event of a near-term correction, the stock market was on track to appreciate this year and the next due to rising growth in the US and abroad.
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to