Wall Street sustained a fresh bruising in the past week as renewed concerns over the financial health of major banks and two large mortgage-financing firms shook investor confidence.
The main market indexes have entered “bear market” territory with a drop of more than 20 percent from their peaks amid a lingering housing market slump, a credit crunch and rocketing world oil prices.
Fears about the financial stability of Fannie Mae and Freddie Mac, two companies which help prop up the vast US mortgage market, sparked a heavy selloff of the companies’ shares and dented wider market sentiment.
PHOTO: BLOOMBERG
The leading Dow Jones Industrial Average shed 1.7 percent to 11,100.54 in the week to Friday.
The tech-rich NASDAQ lost a much slighter 0.3 percent for the week to 2,239.08, while the broad-market Standard & Poor’s 500 index shed 1.9 percent to 1,239.49.
“This time, credit concerns came in the heavyweight variety, as investors were spooked by talk that mortgage giants Fannie Mae and Freddie Mac may need a bailout by Washington,” Douglas Porter, an economist at BMO Capital Markets, said in a briefing note.
Worries about Fannie and Freddie clouded the market on Friday, as US Treasury Secretary Henry Paulson said the government wanted to support the two firms “in their current form.”
Analysts say that Fannie and Freddie help to keep the multitrillion-dollar mortgage market lubricated because of their role in buying up mortgage portfolios from big banks, repackaging them and selling them as securities to investors.
Concern about their financial health has rippled through Wall Street and global markets because the two firms own or guarantee more than US$5 trillion in loans, or about 40 percent of the total value of home loans in the US.
Analysts said nagging concerns about the banking sector — Wachovia bank warned investors on Wednesday it would likely post a second quarter loss as large as US$2.8 billion — also weighed down Wall Street.
Mortgage and credit woes have been plaguing the banking sector for months, despite the efforts of some banks to stem such losses and raise fresh capital from cash-rich foreign investors.
Traders continued to keep a close eye on Lehman Brothers, a large investment bank, which has seen its stock pounded in recent weeks as some market players have questioned its finances.
The news flow is set to accelerate in the coming week, as a flurry of companies report their latest quarterly earnings, but investors say sentiment is unlikely to change any time soon.
“Next week has the potential to be crucial in terms of near-term market direction. In addition to the start of the heavy flow of second quarter earnings reports, there is a relatively heavy calendar of economic releases,” said Gregory Drahuschak, a market analyst at Janney Montgomery Scott.
A flurry of economic reports, including snapshots on inflation, retail sales and home construction, will be released in the coming week.
Bonds got a lift from the stock market’s troubles. The yield on the 10-year Treasury bond fell to 3.940 percent from 3.990 percent a week earlier and that on the 30-year bond eased to 4.517 percent from 4.531 percent.
RESILIENCE: Deepening bilateral cooperation would extend the peace sustained over the 45 years since the Taiwan Relations Act, Greene said Taiwan-US relations are built on deep economic ties and shared values, American Institute in Taiwan (AIT) Director Raymond Greene said yesterday, adding that strengthening supply chain security in critical industries, enhancing societal resilience through cooperation and deepening partnerships are key to ensuring peace and stability for Taiwan in the years ahead. Greene made the remarks at the National Security Youth Forum, organized by National Taiwan University’s National Security and Strategy Studies Institution in Taipei. In his address in Mandarin Chinese, Greene said the Taiwan-US relationship is built on deep economic ties and shared interests, and grows stronger through the enduring friendship between
GAINING STEAM: The scheme initially failed to gather much attention, with only 188 cards issued in its first year, but gained popularity amid the COVID-19 pandemic Applications for the Employment Gold Card have increased in the past few years, with the card having been issued to a total of 13,191 people from 101 countries since its introduction in 2018, the National Development Council (NDC) said yesterday. Those who have received the card have included celebrities, such as former NBA star Dwight Howard and Australian-South Korean cheerleader Dahye Lee, the NDC said. The four-in-one Employment Gold Card combines a work permit, resident visa, Alien Resident Certificate (ARC) and re-entry permit. It was first introduced in February 2018 through the Act Governing Recruitment and Employment of Foreign Professionals (外國專業人才延攬及雇用法),
The Ministry of Transportation and Communications yesterday said that it would redesign the written portion of the driver’s license exam to make it more rigorous. “We hope that the exam can assess drivers’ understanding of traffic rules, particularly those who take the driver’s license test for the first time. In the past, drivers only needed to cram a book of test questions to pass the written exam,” Minister of Transportation and Communications Chen Shih-kai (陳世凱) told a news conference at the Taoyuan Motor Vehicle Office. “In the future, they would not be able to pass the test unless they study traffic regulations
‘COMING MENACINGLY’: The CDC advised wearing a mask when visiting hospitals or long-term care centers, on public transportation and in crowded indoor venues Hospital visits for COVID-19 last week increased by 113 percent to 41,402, the Centers for Disease Control (CDC) said yesterday, as it encouraged people to wear a mask in three public settings to prevent infection. CDC Epidemic Intelligence Center Deputy Director Lee Chia-lin (李佳琳) said weekly hospital visits for COVID-19 have been increasing for seven consecutive weeks, and 102 severe COVID-19 cases and 19 deaths were confirmed last week, both the highest weekly numbers this year. CDC physician Lee Tsung-han (李宗翰) said the youngest person hospitalized due to the disease this year was reported last week, a one-month-old baby, who does not