Strong auto sales, revived merger and acquisition activity and an expected product launch from Apple helped propel stocks higher in a week that also featured some major headwinds.
Despite uncertainty over Syria and a disappointing jobs report at the week’s close, all three leading indices posted gains for the holiday-shortened week.
The Dow Jones Industrial Average rose 112.19 (0.76 percent) to 14,922.50. The broad-based S&P 500 advanced 22.20 (1.36 percent) to 1,655.17, while the tech-rich NASDAQ Composite Index tacked on 70.14 (1.95 percent) at 3,660.01.
Markets were closed on Monday for the US Labor Day holiday.
The week’s gains were a big improvement over last month, which saw the steepest monthly declines for the Dow and S&P 500 since May last year.
Perhaps the week’s biggest bright spot was US auto sales last month, which showed the industry sold 17 percent more cars than a year ago. General Motors, Ford and Chrysler all posted double-digit gains.
The robust auto sales lifted stocks on Wednesday and “spilled over into better sentiment in general,” said Michael James, managing director of equity trading at Wedbush Securities.
Markets also digested Monday’s news that Verizon would buy out Vodafone’s 45 percent stake in their Verizon Wireless joint venture for US$130 billion. Verizon plans a record US$25 billion debt offering associated with the deal in the next week or two, a person close to the situation said.
On Tuesday, Microsoft turned heads when it announced a US$7.2 billion acquisition of Nokia’s handset business in a bid to become a bigger player in the smartphone business.
Some analysts see increased merger and acquisition activity as a sign of rising confidence in the economy.
Analysts were also cheered by an invitation from Apple announcing an event on Tuesday in California. The gathering is widely expected to be an announcement of the launch of two new versions of the iPhone, including a less expensive model expected to appeal to China and other emerging markets.
On Friday, the Wall Street Journal reported that Apple was preparing to ship iPhones to China Mobile (中國移動) in a long-anticipated deal. Apple closed the week 2.3 percent higher at US$498.22.
The news on autos, telecoms and Apple helped offset Friday’s disappointing jobs report. The US Department of Labor reported a gain of 169,000 jobs last month, below the 177,000 projected by analysts. The report also slashed the jobs estimates for June and July.
The report, while “not a disaster,” was weak enough to suggest that the US Federal Reserve will either delay its plans to taper its bond-buying program, or reduce the program even more gradually than previously thought, said William Lynch, director of investment at Hinsdale Associates.
“I don’t think the economy, as sluggish as it is, can take too much in the way of tapering,” Lynch said.
Investors are also skittish over the efforts of US President Barack Obama’s administration to launch a military strike on Syria in response to Syria’s purported use of chemical weapons.
Crude oil prices on Friday rose to a 28-month high of US$110.53 in New York amid US-Russian tensions over Syria, but equity markets have reacted inconsistently to Syria news, sometimes dropping in recent weeks on Syria headlines, and sometimes not.
“Of all the risks out there, the one that has the highest probability to hurt the market in the near term is the Middle East situation,” said Scott Wren, senior equity strategist at Wells Fargo Advisors.
“The market’s not as focused on it as I think it probably ought to be,” he said.
US congressional debate on Syria is expected to dominate next week’s news. The economic calendar is relatively light, with retail sales and inflation data for last month due on Friday.
The calendar also includes a meeting on Thursday with US Securities and Exchange Commission Chair Mary Jo White and leading exchanges in the wake of the Aug. 22 outage at NASDAQ Stock Market caused by a tech glitch.
Anthony Conroy, a trader at BNY Convergex Group, predicted the market would trade in a “tight range until we get more clarity on the Fed and more clarity on Syria.”
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure