International Markets: New York: A case of the holiday blues

Lingering concern about the outlook for 1998 corporate profits, and an abbreviated week of trading because of Christmas, will send US stocks lower this week. The decline probably won't be too severe, as the lowest interest rates in four years will keep demand for equities steady.

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

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'