As it approaches the year's halfway point, Wall Street is mired in worries about a sputtering US economy and surging energy costs as the market braces for second-quarter corporate results.
Investor sentiment continues to deteriorate amid bleak news on housing, banking and the auto sector.
Although gloom has thickened, some “contrarian” analysts say the negative mood is the kind of environment that could mean a snapback is on the way.
The Dow Jones Industrial Average sank 4.2 percent in the past week to end at 11,346.51 as the blue-chips neared a so-called bear market representing a loss of 20 percent from last year’s high.
The Standard & Poor’s 500 broad-market slumped 3 percent to 1,278.38 and the tech-heavy NASDAQ composite fell 3.8 percent on the week to 2,315.63.
The relentless pounding of the stock market saw no letup in the past week.
The dollar skidded and oil prices burst above US$142 per barrel for the first time, after the US Federal Reserve warned of rising inflation in a weak economy but gave no hint of action on interest rates.
“The Fed’s latest policy directive did a good job of tap dancing; that is, of pointing out risks on all sides without promising any action,” said Ethan Harris, economist at Lehman Brothers.
“Clearly the Fed is trying to buy some time in the face of major conflicting signals,” he said.
Others said that the lack of clarity along with risks of recession and inflation had put investors on the defensive.
“With oil prices bursting through the US$140 threshold and seemingly unstoppable, economists are busily debating whether it’s all going to end in fire [inflation] or ice [deep recession],” Douglas Porter at BMO Capital Markets said.
“Equity markets aren’t so concerned about the fineries of the debate, but are instead much more focused on the ‘it’s all going to end’ portion of the discussion,” Porter said.
Kevin Giddis, analyst at Morgan Keegan, said the market and the economy appear to be in a downward spiral with no relief in sight.
“As the economy weakens, the dollar falls. As the dollar falls, the price of crude oil, supplemented by strong global demand, makes a new record every day,” he said.
“This is a nasty trend that is likely to be with us for the balance of 2008. This will keep the pressure high on the Fed to do something. The bigger problem is they are limited in the response. But, if you can affect the dollar, you can affect the price of oil and the overall economy,” Giddis said. “Short of that we are probably going to wallow around in the mud until we reach the bottom of a crisis that has shaken this country to the core.”
The panic on the stock market helped bonds, which investors often flock to during volatile times. The yield on the 10-year Treasury bond fell to 3.990 percent from 4.137 percent a week earlier and that on the 30-year bond eased to 4.537 percent from 4.702 percent. Bond yields and prices move in opposite directions.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS