US stocks retreated this week following a light calendar of economic news punctuated by a brief mid-week swoon over troubles at a leading Portuguese bank.
Equities scored modest gains on Friday, partially offsetting the losses from the prior day when worries about Portugal’s banking system rocked the market. However, Friday’s increases were not enough to offset earlier losses.
The Dow Jones Industrial Average fell 124.45 points (0.73 percent) to 16,943.81.
The broad-based S&P 500 dropped 17.87 (0.9 percent) to 1,967.57, while the tech-rich NASDAQ Composite Index gave up 70.44 (1.57 percent) at 4,415.49.
Investors pored over minutes from the US Federal Reserve’s June policy meeting released on Wednesday, which showed the bank plans to end its bond-buying stimulus program in October.
The Fed also confirmed that it will keep near-zero benchmark interest rate for “a considerable time” after the asset-purchase program ends, keeping its timeframe of raising rates in the middle of next year. The minutes helped push stocks higher on Wednesday.
However, US stocks nosedived the next morning, following European markets sharply lower, as investors recoiled at news Portugal’s market regulator halted trading in Banco Espirito Santo (BES) amid allegations the bank’s parent company covered up a 1.3 billion euro (US$1.8 billion) hole in its accounts.
The news renewed concern that Portugal’s banks remain vulnerable after the country emerged from a three-year international bailout in May.
Both US and European markets rose on Friday following reassurances from top Portuguese officials that BES was in solid shape.
Still, the episode showed the brittleness of investor sentiment after a buoyant second quarter that lifted the S&P 500 4.7 percent and set several new records. Some market commentators predict a 10 to 12 percent correction in the weeks ahead.
“Portugal was certainly an issue,” Alan Skrainka of Cornerstone Wealth Management said.
“It shows there is a lot of nervousness,” after US markets hit record highs last week, he said, calling the BES news “an excuse for the stock market to sell off.”
Despite a run of strong monthly US Labor Department jobs reports and some other encouraging data, analysts still see signs of economic weakness. Top of the list has been disappointing news from retailers. The Container Store pointed to a “funk” within the industry as it reported a loss in its fiscal first quarter. Gap reported that June comparable-store sales fell 2 percent.
The dreary retail news “tells investors that the much-anticipated economic bounce in the second quarter might be disappointing,” FTN Financial chief economist Christopher Low said.
“People are bound to be nervous,” Low said. “I expects stocks will reprice as guidance comes over the course of the next month.”
Wunderlich Securities chief market strategist Art Hogan described investors as “edgy” given the surge in valuations.
“We know we need further catalysts to justify the levels we’re at,” Hogan said. “We’re optimistic those catalysts will come to us during earnings season, but it’s still a ‘show-me’ story.”
On Friday, Wells Fargo kicked off earnings season for the large financials, reporting a 3.8 percent rise in second-quarter earnings to US$5.7 billion, or US$1.01 per share, meeting expectations.
Next week’s earnings calendar picks up significantly and includes reports from most of the remaining large banks, including JPMorgan Chase and Goldman Sachs. Others to report include Johnson & Johnson, Yahoo, Intel, IBM and General Electric.
Major economic indicators include retail sales and industrial production for last month and the Fed’s Beige Book outlining economic conditions.
Fed Chair Janet Yellen will be back in the spotlight as she delivers the central bank’s semi-annual report on the economy and monetary policy to Congress in hearings on Tuesday and Wednesday. Investors will be watching for clues on the direction of the economy and the outlook for raising interest rates.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”