International Markets: New York: A case of the holiday blues
Sunday 21 December 1997
Such companies as footwear giant Nike and investment bank JP Morgan disappointed investors last week by reporting weak earnings or warning that profits would fall short of estimates. Both companies cited adverse conditions in Asia for the shortfall.
The first sign that turmoil in Asian economies would be more than a blip on the radar screen for the US stock market came in late October, when the Dow Jones Industrial Average took a one-day 554-point tumble. Last week markets in Japan and Hong Kong slumped again on fears of more bankruptcies.
The volatility caused by weakness in Asia may be heightened this week by a dearth of trading activity. In the past three years, the volume of shares traded on the New York exchange during Christmas week has been 30 per cent below its yearly average.
The Dow industrials fell 82.01 points, or 1 per cent, to 7,756.29 last week. The Standard & Poor's 500 fell 0.7 per cent. The two worst-performing stocks in the S&P 500 this month are Cabletron Systems and Oracle, down 40 per cent and 33 per cent respectively.
The US stock market may be the victim of its own success. Share prices have more than doubled in the last three years, probably reflecting all the good news to come.
"The market can't afford any disappointments," said Jeff Petherick, a money manager in Loomis Sayles. "But what usually undoes the US stock market is rising interest rates, and we're not seeing that right now."
The yield on the benchmark 30-year Treasury bond fell as low as 5.86 per cent on Friday, down from 6.64 per cent when the year began.
The slide in yields came after the Federal Reserve declined to raise the federal funds rate from its current 5.5 per cent at a meeting on Tuesday. Bonds were also helped by tumbling world stock markets.
"The economic slowdown in Asia will help relieve inflationary pressures so that the Fed won't raise interest rates in 1998," said Art Bonnel, manager of the $100m Bonnel Growth Fund. "In fact, it's more likely we'll see a decrease in rates next year."
The US stock market tends to get a case of earnings jitters at this time every quarter, so investors shouldn't attach too much importance to the market's recent woes, said Jack Shaughnessy, president of Boston Security Counsellors.
It is, after all, the holiday season.
Copyright: IOS & Bloomberg
- 1 This is what happens when you tattoo Charmander on yourself, drunk, and with no experience
- 2 BBC election debate: The one photo that summed up the whole 90-minute leaders debate
- 3 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 4 The Batman v Superman: Dawn of Justice trailer has leaked – watch
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
If I’m being racially abused I don’t need a white stranger with a saviour complex to rescue me
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
Russian warships in English Channel 'to conduct anti-aircraft and anti-submarine military drills'
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...