US stocks suffered their worst week in recent memory after a poor report on the Chinese economy sparked broader anxiety about emerging economies and whether equities are overvalued.
The deepest decline came in the Dow Jones Industrial Average, which fell 579.45 points (3.52 percent) to 15,879.11 in the biggest weekly loss in percent terms since November 2011.
The broad-based S&P 500 fell 48.41 (2.63 percent) to 1,790.29, while the tech-rich NASDAQ Composite Index declined 69.41 (1.65 percent) to 4,128.17.
This week’s bruising finale raised the issue of a market correction to the top of the agenda.
After the S&P 500 surged nearly 30 percent last year, equity markets have largely meandered through the first part of the new year on loose confidence that the US economic recovery was on track. However, stocks plunged on Thursday after HSBC’s China manufacturing sector purchasing managers index (PMI) fell to 49.6, below the 50 line between growth and contraction. US Treasury prices also rose, while emerging-economy currencies plummeted.
Stocks continued to fall on Friday, suggesting broader investor discomfort.
“It may be that if anyone is looking for reasons to sell, they can always find reasons to sell,” BMO Private Bank chief investment officer Jack Ablin said, referring China’s PMI report.
Ablin said the market was probably overvalued, citing estimates that the stock market was overvalued by 10 to 20 percent.
“There is a real reassessment going on on the street that things might have really gotten carried away last year,” Marblehead Asset Management director Mace Blicksilver said.
“The market is in a dangerous position because we have not really had a correction in a long time,” Blicksilver said, characterizing the recent round of corporate earnings as “okay,” but no better.
The results to date have seen a few standout winners, like online video service Netflix, which posted a big increase in subscriptions, and Microsoft, which notched record revenues thanks to strong demand for Xbox consoles and other products.
However, Wall Street punished IBM after it posted its seventh straight quarter of declining revenues. Even more typical was the reaction to Johnson & Johnson, which fell after giving a disappointing outlook even as it bested earnings expectations.
“I was hopeful that fundamentals would pick up,” Ablin said. “But so far, earnings season, while reasonable, hasn’t been a huge positive surprise.”
Ventural Wealth Management portfolio strategist Tom Cahill said equity markets were jittery in light of the steep declines in recent days in the Argentine peso and other emerging-market currencies.
“The situation that is emerging right now with the currencies in South America and other emerging markets is significant enough that it could lead to further downside in the near term in the equities,” Cahill said.
The drop in emerging-market currencies has added to speculation on whether next week’s policy meeting of the US Federal Reserve will result in a decision to continue to scale back stimulus, analysts said.
Cahill said this week’s volatility could persuade Fed officials of the need to “move ahead very carefully” with the taper, but other analysts expect the US central bank to stay the course and proceed with further reducing bond purchases.
Investors will also wade through a busy week of economic data, which include the Case-Shiller index of home prices, the Conference Board’s report on consumer confidence and the first estimate of fourth-quarter GDP.
The calendar of corporate earnings include reports from giants like Apple, Pfizer, Boeing, Caterpillar, ExxonMobil, Facebook and Google.
Traders could see individual stocks lifted or depressed by an ongoing wave of shareholder activism that shows no sign of abating.
Last week, Third Point disclosed a campaign to shake up Dow Chemical, while longtime corporate raider Carl Icahn pressed ahead with campaigns to win a large share buyback from Apple and the spinoff of eBay’s PayPal unit.
Taiwanese firms have increased investment in the Philippines in recent years as Manila’s ties with Washington deepen and global supply chains continue to shift away from China, an expert at the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The Philippines had not been among Taiwanese investors’ top choices in Southeast Asia, CIER Taiwan ASEAN Studies Center director Kristy Hsu (徐遵慈) said at a seminar in Taipei. However, Taiwan’s investment in the country has grown significantly since the COVID-19 pandemic, reaching US $257 million last year, a high in recent years, she said. Although Taiwan’s total investment in the Philippines still lags
Intel Corp regards Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) as a longstanding partner, as the US chipmaker would continue outsourcing production of advanced chips to TSMC, Intel chief executive officer Lip-Bu Tan (陳立武) said yesterday. “I don’t look at people as competitors. I look at the collaboration... Nvidia is also, you know, a good friend,” Tan told a news conference following his keynote speech at the Computex trade show in Taipei. “It’s a very trusted partnership for us... We are a big, top customer for them, and we’re going to continue doing that,” he said, referring to TSMC, the world’s largest foundry
Hon Hai Precision Industry Co (鴻海精密) yesterday said it would work with US chipmaker Intel Corp to jointly develop and deploy next-generation artificial intelligence (AI) infrastructure and intelligent computing platforms in a move to capture booming demand for AI computing systems. Hon Hai, also known as Foxconn Technology Group (富士康), said in a statement that the partnership would combine its global manufacturing scale, system integration expertise and AI data center deployment capabilities with Intel’s strengths in processor architecture, silicon technologies and software ecosystem. The companies said they plan to work on equipment used in AI data centers, including server racks powered by
Artificial intelligence (AI) agents would supplant smartphones as the center of people’s digital lives, fundamentally reshaping personal devices and driving a major computing upgrade cycle, Qualcomm Inc CEO Cristiano Amon said yesterday. In his keynote speech for this year’s Computex trade show in Taipei, Amon said that the rise of "agentic AI" — AI systems capable of reasoning, planning and carrying out tasks autonomously — would transform how people interact with technology across phones, PCs, vehicles and wearable devices. Describing the technology as the next major evolution in computing, Amon said that "2026 is the year of agents.” For decades, smartphones have sat
RSS