INTERNATIONAL MARKETS: NEW YORK: Investors flee from equities
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Your support makes all the difference.What a difference a week makes. Investors who pushed stocks to record levels last Friday fled US equities this week amid concern that Asia's slowing economies and tumbling currencies will take a big chunk out of corporate profits.
Investors said equities are likely to make little headway in coming days, because there's no sign that all the bad news about Asia is out. Computer- related stocks such as Oracle led the decline, and are likely to fall further.
"None of us know how serious this Asian flu is going to be," said Gil Knight at Allied Investment Advisors. "If it looks like a couple of weeks from now things are really not that bad, then we could see stocks go up as long as interest rates stay down."
The Standard & Poor's 500 index fell 3.1 per cent last week from a record 983.79 only seven days before. The Dow Jones Industrial Average fell 3.8 per cent. The most damage came in the technology-heavy Nasdaq Composite index, which slumped 6.0 per cent, its worst week in seven years.
Ms Knight said stocks would jump if corporate managers started to say the worst of the slowdown is behind them. Lately, though, it's been a steady flow of bad news. "With the tech sector it's just bad report after bad report," said Mace Blicksilver at Credit Lyonnais Securities.
This week's corporate earnings calendar isn't likely to contain any big positive surprises for investors.Micron Technology reports on Monday, while Nike reports on Thursday.
One positive trend for stocks may be reinforced. The Federal Reserve's next move will probably be an interest rate cut. That's the message from the US.bond market, where some investors are betting the financial upheaval in Asia will put the brakes on US growth, cut into company profits and keep a lid on inflation - already running at the slowest pace in a decade.
"I don't think people realise how profound the impact of this Asian devaluation is," said Carl Ericson at Colonial Management Associates in Boston. The Fed will probably cut rates next year, though a move may not come for several months, he said.
Some investors, though, say a rate cut is unlikely. With the jobless rate at the lowest in 24 years and consumers brimming with confidence, they fret that inflation may be poised to quicken.
Yet plenty of investors say reports in coming months are likely to show a slowdown in manufacturing and exports as demand for US products from troubled Pacific Rim nations wanes.
"In Asia we have a financial crisis - it is serious and it is huge," said David Kotok at Cumberland Advisors in New Jersey. "At the slightest sign of economic weakness, the Fed will cut rates."
Copyright: IOS & Bloomberg
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