Wall Street stayed under the spell of Alan Greenspan this week, doing very little in run-up little in the run-up to his speech on the US economy on Thursday and even less afterwards.
US equities failed to notch any substantial move in either direction in a remarkably listless week of trading sessions. This was despite the fact that Wall Street had a steady stream of news and data points to digest, ranging from the Fed chief’s commentary to the midquarter update from Intel, the semiconductor sector bellwether.
By the close yesterday, the Dow Jones Industrial Average was 0.1 per cent up at 10,512.63 as the broader S&P 500 index eased 0.2 per cent to 1,198.11. The technology-dominated Nasdaq Composite gave up 0.7 per cent to 2,063.
Over the week, the Dow was 0.5 per cent higher, with the S&P adding 0.2 per cent. The Nasdaq, however, was down 0.4 per cent.
The lack of direction shows how uncertain Wall Street is about where the market is heading. Bulls maintain that the uptrend that began on April 21, lifting the Nasdaq more than 10 per cent and the Dow and S&P 500 more than 5 per cent, will continue amid signs that the economy is improving. Bears, however, insist the rally will falter, with stocks resuming the downward trajectory that has dominated trading this year as the Fed continues to raise rates and earnings growth slows.
The US central bank chief’s testimony on the US economy to Washington lawmakers was seen as confirming the fact that interest rate rises were still in on the cards for the foreseeable future by asserting that the world’s largest economy was on a “reasonably firm footing”.
However, some market watchers said the chairman’s speech followed contradictory statements from other Fed officials, making it harder for the market to find direction.
“The market is pretty much where it should be; we be. We have had an upturn recently, with long-term rates not budging, which has been the surprise of the past year,” said Stephen Goddard of investment firm London Company of Virginia.
“I would not say that valuations are not compelling at this level. While we’ll see more mergers and increased dividends, we’ll also see very little organic growth from companies, so I can’t jump up and down one way or the other.”
Earnings and corporate news drove trading in some stocks. Sears Holdings saw its shares tumble 8.7 per cent on Tuesday as investors took in a loss from the retailer in its latest quarter.
Meanwhile, General Motors saw investors cheer a plan to cut 25,000 jobs by bidding its shares up 1 per cent in the same session. A day later, the world’s largest carmaker saw its stock add a further 4.2 per cent on news that Kirk Kerkorian, the financier, had raised his stake in the company to 7.2 per cent. GM’s good fortunes continued yesterday, when hopes for an agreement with its unions sent the shares another 8.5 per cent higher by the close.
The rally also helped Ford, which gained 3.1 per cent. Delphi and Visteon, the component makers, gained 3.8 per cent and 0.7 per cent, respectively.
Technology shares were in focus throughout the week, with Texas Instruments and Intel both raising forecasts for the coming quarters in a boost to confidence about the outlook for the technology sector. However, while TI saw shares add 2.3 per cent on its guidance increase, investors appeared to have wanted more from Intel, whose shares fell 2.6 per cent by yesterday’s close.
Among internet stocks, IAC/InterActiveCorp shares jumped 4.8 per cent on Wednesday after it agreed to sell its 5.4 per cent stake in Vivendi Universal Entertainment – the US studios, TV and theme parks business – for $3.4bn.
Google shares had a volatile week, declining 4.6 per cent on Wednesday amid concerns about the valuation of the stock as it nears $300 per share. However, a day later, those concerns appeared to have been assuaged by a note from Merrill Lynch analysts. They said that they expected the company to continue to benefit from growth in paid search services.