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Stock market roller-coaster ride expected to continue

US investors are girding for fresh stock market turmoil in the coming week after riding a market roller-coaster in recent days, which has shaken their confidence in the mortgage and credit markets.

The major US stock market indices ended the week higher on Friday than a week ago, but investors saw their portfolios whiplashed as uncertainty about the US housing sector and a related credit squeeze swept world markets.

The leading Dow Jones Industrial Average has fluctuated by more than 200 points in recent days, investors have fled mortgage related investments and the Federal Reserve has injected tens of billions of dollars into the financial system to shore up confidence.

The blue-chip Dow Jones gained 0.44 percent for the week to end on Friday at 13,239.54, following a 0.63 percent decline in the prior week and a more than 4 percent drop in the week before that.

The broad-market Standard and Poor's 500 rose a more substantial 1.44 percent over the week to 1,453.64.

The tech-rich NASDAQ composite increased 1.34 percent on the week to Friday to finish at 2,544.89.

interventions

Despite the end-of-week gains, analysts said fresh Fed interventions could be required in coming days if the markets display renewed volatility and credit problems.

"Central banks are doing the right thing, they're adding liquidity to a system that needs it and they will continue to do so until it doesn't need it. It's part of the process to get out of the credit crunch and financial turmoil," said Art Hogan, an analyst at Jefferies and Co.

The US central bank pumped US$38 billion into the financial system on Friday in a move some analysts said boosted sentiment.

While much of the past week's focus was on the stock market and mortgage and credit sectors, economic news is likely to grab more headlines in coming days.

Despite the jitters, growth in the US economy accelerated to a 3.4 percent annualized pace in the second quarter, up from 0.6 percent in the first three months of the year.

However, some economists believe the housing downturn, which started more than a year ago, and growing fears about the mortgage market could spill over into the wider economy.

A government report on housing starts next Thursday will likely stimulate interest.

Most economists expect housing starts to have slowed to 1.41 million last month compared with 1.47 million in the prior month as homebuilders cut back on new developments.

Investors will get an update on retail sales tomorrow with most analysts anticipating a rebound in activity. Sales are forecast to rise 0.2 percent last month compared with a 0.9 percent decline in the prior month.

confidence

Such a rebound, or a stronger than expected report, would likely help restore some confidence, market watchers said.

They also warned that further trading dips could lay ahead.

Bond prices fell in the week to Friday.

The yield on the 10-year US Treasury bond rose to 4.776 percent from 4.700 percent a week earlier. The 30-year bond yield jumped to 5.005 percent from 4.867 percent. Bond yields and prices move in opposite directions.

Asian stocks were also hammered on Friday by a global rout after heavy losses on US and European markets as investors fled for shelter from the US housing woes.

Dealers said investors were alarmed by signs that the fallout from the US subprime mortgage problems was spreading.

If there is one thing investors hate it is uncertainty, and with the risk of more skeletons in the closet, few people were in the mood to buy.

News that the US, Eurozone, Japanese and other central banks had pumped huge amounts of cash into the financial system only appeared to add to the sense of nervousness in Asian markets about the US mortgage market troubles.

Although the central banks' actions aimed to reassure investors, some took the view that the problem could be bigger than had been initially thought because the central banks were forced to intervene.

Investors fear that the US housing woes might eventually affect global economic growth if funds for business dry up, although analysts said that so far the fallout appeared to be limited.

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