Wall Street, hesitant about the pace of recovery, will receive a fresh batch of corporate earnings and economic data this week that may help set the tone for a skittish market.
The choppy trade of the past week highlights a lack of confidence in the economic recovery and mixed signals from earnings and economic data, analysts said.
The market will open a holiday-shortened week on Tuesday after the Martin Luther King observance, with a handful of economic reports expected, including on housing starts and wholesale prices.
“That will leave the focus squarely on corporate earnings results,” said Avery Shenfeld at CIBC World Markets.
Over the week to Friday, the Dow Jones Industrial Average lost a modest 0.08 percent to 10,609.65, after hitting fresh 15-month highs earlier in the week.
The technology-heavy NASDAQ composite dropped 1.26 percent to 2,287.99 and the broad Standard & Poor’s 500 index shed 0.78 percent to 1,136.03.
The market saw roller-coaster action last week, with disappointment over weak results from aluminum giant Alcoa on Monday souring the mood at the start of the corporate earnings season.
This was offset in part by robust profits reported by chipmaker Intel Corp and banking giant JPMorgan Chase, which “should help revive investor confidence that the global economy is turning around,” said Fred Dickson, market strategist at DA Davidson & Co.
Yet some analysts say it will be harder to push the market higher in the wake of the stunning 60 percent gains since last March, in anticipation of a recovery in economic and profit growth.
Kent Engelke, chief economic strategist at Capitol Securities Management, said he sees doubts about whether the economy can stand on its own when stimulus from government spending and ultra-low interest rates ends.
“I think equities will experience a period of tough sledding as it will take time for investors to gain confidence the world will not come to an end as the economy begins to be weaned off of its high octane energy,” he said.
But Stephen Auth at Federated Investors said many market players are too pessimistic.
“Our positive economic outlook continues to proceed virtually on schedule,” he said.
“The all-important housing market bottomed four to five months ago, and somewhere in the future we expect dramatic improvements in home construction to try to catch up with nearly four years of pent-up demand,” he said.
Auth said the labor market is close to job creation and consumer spending “has begun to rebound.”
“Given all this, we remain above-consensus for economic growth this year. Importantly, evidence suggests that this strong cyclical growth could last well into 2011,” he said.
Robert Kavcic at BMO Capital Markets said traders may have pushed the stock market up too far in anticipation of the earnings recovery.
“Earnings expectations have continued to rise and sentiment has made a significant move into the bullish camp,” he said.
“While stocks still have a strong profit recovery to feast on, they might just need a little time to digest,” he said.
Hugh Johnson at Johnson Illington Advisors said too much cannot be read into the past week’s action.
“What seems to be happening is that the stock market this year continues to advance but the gusto has been taken out of the market,” he said.
“It’s too early in the earnings season to reach any conclusion about earnings, and as a result the investors have paused until they have a better idea. Participants are looking for signs of sustainable growth going forward. It is not enough anymore to beat [forecasts] on the bottom line,” Johnson said.
Bonds rallied in the week.
The yield on the 10-year Treasury bond fell to 3.6767 percent from 3.808 percent a week earlier and that on the 30-year bond dropped to 4.575 percent against 4.695 percent. Bond yields and prices move in opposite directions.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique