US stocks lost momentum in the past week as financial woes continued to weigh down Wall Street with investors looking ahead to a busy week of economic news.
Investors sustained fresh losses in the past week as renewed speculation swirled about the financial health of mortgage-finance giants Fannie Mae and Freddie Mac, which prop up a substantial part of the ailing US mortgage market.
The US Treasury said it was keeping an eye on the firms’ operations as some media reports suggested the government could be poised to offer substantial financial assistance to the two companies.
PHOTO: BLOOMBERG
Other media reports that said Lehman Brothers was seeking cash infusions to help bolster its balance sheet also kept the financial sector in focus on Friday.
The Dow Jones Industrial Average of 30 blue-chip stocks closed down 0.27 percent at 11,628.06 in the week to Friday, while the technology-heavy NASDAQ composite index dipped 1.55 percent to 2,414.71.
The broad-market Standard & Poor’s 500 index lost 0.46 percent to 1,292.20.
“With Fan and Fred on the brink of a Treasury bailout, crucial support to the mortgage market will be sorely tested,” said Sal Guatieri, an economist at BMO Capital Markets.
The financial sector is likely to remain in focus in the coming week after more banks reached agreements with regulators in recent days to buy back stressed auction rate securities marketed to investors before the credit crunch worsened in February.
Regulators have said their probes are continuing and analysts expect more banks to sign repurchase agreements in coming weeks.
Auction rate securities, essentially debt instruments issued by financial firms, municipalities and student loan companies, typically have a fairly lengthy maturity. But the interest rates on such securities can change at auctions run by the banks.
The repurchase agreements could further strain banks’ finances, however.
“The ensnared banks, in turn, are asking larger players in the market to redeem their long-term borrowings, which could trigger further sales of asset-backed securities. This means credit is about to get even costlier and tighter,” Guatieri said.
While the markets were mostly focused on the financial arena in the past week, several economic reports will likely grab significant attention in coming days.
Investors will receive fresh updates on the state of the housing market, consumer spending and income, consumer sentiment and a second estimate for second-quarter growth.
The US Federal Reserve is also due to release the minutes from its interest rate policy meeting earlier this month when the central bank opted to keep its key interest rate unchanged at 2 percent amid economic uncertainty and concerns about inflation.
Most economists expect existing home sales to tick up to a seasonally adjusted annualized rate of 4.9 million properties last month after sales slipped 2.6 percent to 4.86 million in the previous month.
Existing home sales have fallen more than 15 percent in the past year, underlining the continuing decline in the housing market.
“Healing in the housing market might still be a few quarters away, time that Fannie and Freddie and possibly several others in the financial industry probably don’t have,” analysts at RBC Capital Markets said in a briefing note.
Bond prices ended the week to Friday mixed. The yield on the 10-year Treasury bond rose to 3.867 percent from 3.852 percent a week earlier, while that on the 30-year bond dropped to 4.463 percent from 4.473 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