After putting together a remarkable four-week winning streak, Wall Street faces a new test of its rally in the coming week with the opening of earnings season.
Although the market has been lifted by optimism that the worst crisis since the Great Depression is easing, the news from corporate America may provide clues about whether and when recovery is coming, say analysts.
The Dow Jones Industrial Average climbed 3.1 percent in the week to Friday to close at 8,017.59, capping four sizzling weeks that added some 22 percent to the blue-chip index.
The Standard & Poor’s 500 index advanced 3.25 percent to 842.50, capping a 24 percent gain from lows hit on March 9.
The tech-heavy NASDAQ powered higher by 4.96 percent on the week to 1,621.87.
The market managed to shrug off weak economic news in the past few sessions, amid a growing consensus that the worst may be over.
“While the economic news continues to be awful, recent news, including the small incremental bump in auto sales, factory orders and [a purchasing manager survey on] manufacturing, are leading many investors to believe the end of the economic recession is finally coming into sight,” said Fred Dickson, chief market strategist at DA Davidson & Co.
“We are holding to our view that the rate of decline in the economy is beginning to slow, leading us to believe the economy has a good chance of bottoming out this summer,” he said.
Dickson said the rally has gained momentum as short sellers scramble to take profits and cover positions, and money managers with big cash positions “are becoming more nervous about missing the normal big early cycle move that traditionally leads an economic recovery.”
But he said a key test will be upcoming with first-quarter earnings reports that will begin to hit the tape over the next few days.
“That will be a real test to see if the current rally is just a technical rally within the overall context of an ongoing bear market or the first leg of a new bull market,” he said.
“Investors are very focused on what the economy will do in the second and third quarters,” Hugh Johnson at Johnson Illington Advisors said. “To get an idea of what the economy and earnings will do you have to look carefully at these earnings reports.”
Analysts said the market took in stride Friday’s report showing a rise in the unemployment rate to 8.5 percent as 663,000 jobs were shed.
Douglas Porter, economist at BMO Capital Markets, said the view looking forward is not as bleak as in the rear-view mirror.
“Employment will be among the last major indicators to turn the corner,” he said.
“First, sales must revive, and then be sustained, then business will try to squeeze more out of remaining employees, then add hours to the workweek, and only then add to payrolls. So, even as jobs spiral lower, another broad array of indicators this week suggested that the howling recession winds may be easing a touch.”
Bonds fell sharply for the week on improved appetite for stocks. The yield on the 10-year US Treasury bond rose to 2.907 percent from 2.761 percent a week earlier and that on the 30-year bond increased to 3.721 percent from 3.618 percent. Bond yields and prices move in opposite directions.
SILICON VALLEY HUB: The office would showcase Taiwan’s strengths in semiconductors and artificial intelligence, and help Taiwanese start-ups connect with global opportunities Taiwan has established an office in Palo Alto, one of the principal cities of Silicon Valley in California, aimed at helping Taiwanese technology start-ups gain global visibility, the National Development Council said yesterday. The “Startup Island Taiwan Silicon Valley hub” at No. 299 California Avenue is focused on “supporting start-ups and innovators by providing professional consulting, co-working spaces, and community platforms,” the council said in a post on its Web site. The office is the second overseas start-up hub established by the council, after a similar site was set up in Tokyo in September last year. Representatives from Taiwanese start-ups, local businesses and
‘DETERRENT’: US national security adviser-designate Mike Waltz said that he wants to speed up deliveries of weapons purchased by Taiwan to deter threats from China US president-elect Donald Trump’s nominee for US secretary of defense, Pete Hegseth, affirmed his commitment to peace in the Taiwan Strait during his confirmation hearing in Washington on Tuesday. Hegseth called China “the most comprehensive and serious challenge to US national security” and said that he would aim to limit Beijing’s expansion in the Indo-Pacific region, Voice of America reported. He would also adhere to long-standing policies to prevent miscalculations, Hegseth added. The US Senate Armed Services Committee hearing was the first for a nominee of Trump’s incoming Cabinet, and questions mostly focused on whether he was fit for the
EXPRESSING GRATITUDE: Without its Taiwanese partners which are ‘working around the clock,’ Nvidia could not meet AI demand, CEO Jensen Huang said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and US-based artificial intelligence (AI) chip designer Nvidia Corp have partnered with each other on silicon photonics development, Nvidia founder and CEO Jensen Huang (黃仁勳) said. Speaking with reporters after he met with TSMC chairman C.C. Wei (魏哲家) in Taipei on Friday, Huang said his company was working with the world’s largest contract chipmaker on silicon photonics, but admitted it was unlikely for the cooperation to yield results any time soon, and both sides would need several years to achieve concrete outcomes. To have a stake in the silicon photonics supply chain, TSMC and
INDUSTRIAL CLUSTER: In Germany, the sector would be developed around Taiwan Semiconductor Manufacturing Co’s plant, and extend to Poland and the Czech Republic The Executive Yuan’s economic diplomacy task force has approved programs aimed at bolstering the nation’s chip diplomacy with Japan and European nations. The task force in its first meeting had its operational mechanism and organizational structure confirmed, with Premier Cho Jung-tai (卓榮泰) the convener, and Vice Premier Cheng Li-chiun (鄭麗君) and Minister Without Portfolio Ma Yung-cheng (馬永成) the deputy conveners. Minister of Foreign Affairs Lin Chia-lung (林佳龍) would be the convener of the task force’s strategy group in charge of policy planning for economic diplomacy. The meeting was attended by the heads of the National Development Council, the Ministry of Economic Affairs, the
RSS