US Stock Market Update and OutlookStocks to look for stability along with data, earnings
MarketWatch: U.S. stocks will start the next week with some optimism that the market's recent efforts to stabilize will continue, even as the outlook for the economy and earnings get worse from the fallout of the credit crisis. The Dow industrials managed to close on their first week of gains in five. The broad S&P 500 Index and the Nasdaq Composite Index posted weekly gains after three straight weeks of declines.
"That's a cause for celebration," said Ken Tower, market strategist at Quantitative Analysis Service. "It might mark a period of stabilization and that's what people could use the most." On Friday, the Dow Jones Industrial Average finished down 127 points, or 1.4%, to end at 8,852. The S&P 500 Index fell 5 points, or 0.6%, to 940, and the Nasdaq Composite Index lost 6 points, or 0.4%, to 1,711. But for the week, the Dow rose 4.75%, the S&P gained 4.6%, and the Nasdaq advanced 3.7%.
After the collapse of Lehman Brothers, stock markets around the globe had been in free fall as banks stopped lending to each other out of fear of further bankruptcies. "We've been in one of the worst declines of the past 80 years," Tower added. "The good news is once it's behind you can find some winners and losers, whereas during the decline everything is being sold. "From an investor point of view, if we can say that this week's stabilization marks the end of the severe downdraft, then we can start to look for differentiation and winning and losing sectors."
A volatile relief rally
The week started with a relief rally in stock markets around the world, after European and U.S. leaders agreed to take massive actions to help stem the global financial meltdown of the previous three weeks. The Dow jumped more than 900 points for its biggest point gain on record and the other main U.S. indexes rallied by 11%. Monday's actions by global financial leaders seemed to help thaw frozen credit and interbank lending, which had prevented everything from small firms to large institutions from conducting their business.
Over the past week, a gradual but persistent drop in the London interbank offered rate, or Libor, for short-term loans signaled banks might soon resume making routine loans to each other, likely averting a disastrous implosion of the financial system, economists said. Several trillions of dollars were slated by the European and U.S. governments to guarantee deposits and interbank loans and to recapitalize troubled financial institutions, in exchange for share ownership.
"These measures seem susceptible to provide answers to the financial crisis," said Caroline Newhouse-Cohen, an economist at BNP Paribas. "However, the effect of the various plans has not been dramatic on the financial markets. While the financial crisis may be about to peak, problems on the real economy front are, on the contrary, increasingly striking," she wrote in a note.
Economic realities
The market's optimism began to fade Tuesday as investors turned their attention to the economic damage being wrought by the yearlong credit crisis. By Wednesday, the Dow slumped more than 733 points for its second-worst drop on record. The U.S. economy, already hit by the slumping housing market and the credit crisis, showed fresh signs of recession in September and October, as revealed in plunging retail sales, industrial production, manufacturing and housing starts.
The Commerce Department reported retail sales in September fell 1.2%, nearly double what economists expected -- an especially troubling number, given consumer spending drives two-thirds of U.S. economic activity. "The economy is pretty much showing what we thought all along: that we're slipping into or already in recession," said Sam Stovall, senior investment strategist at Standard & Poor's.
In addition, there are signs "that the global economy is slipping into recession," Stovall commented, pointing to a continued slide in oil prices. Crude futures dropped briefly fell below $70 a barrel for the first time in more than a year, and ended the week with a loss of 8%. With an expected slide in demand next year, the Organization of Petroleum Exporting Countries said late Thursday it would reschedule its emergency meeting for Friday, Oct. 24 -- three weeks earlier than previously announced.
Bernanke, data, and earnings
Next week will be relatively light in terms of economic data, with leading economic indicators for September due on Monday, weekly jobless claims on Thursday and existing home sales for September due Friday. But Federal Reserve Chairman Ben Bernanke is again slated to testify to Congress about the state of the economy, and markets will attempt to decipher any signals that the Fed might deliver further rate cuts to boost the economy. A flurry of quarterly reports is also due, with investors likely to focus more on any outlooks provided than the actual results.
KLSE CI Technical Update and Outlook
ICap: The KLSE CI is below its 30-day, 50-day and 50 week moving averages. Both its daily MACD and DMI are bearish.
On the Weekly KLSE CI, the joys of a global bounce were rather short-lived as recession concerns mounted. The KLCI has breached its initial suport and is now nearing the 50% retracement target. Although the weekly stochastic oscillator is attempting to turn neutral from being grossly oversold, the weekly MACD and DMI are still strongly bearish, indicating that the sharp slide may need to build base before bottoming out. Thus, a V-shaped rebound is unlikely to happen soon until stabilisation is seen in the markets.
* Will the change of faces be able to save the day huh?
* KNM-Will the share buying by major shareholder/share buy back save the day huh? It may not if is a share buyback...here are the evidences.
* The Standard: On Friday, it was mentioned that banks in Hong Kong will buy back mini bonds issued by Lehman Brothers from holders at market value, as proposed by the Government. The investors in trouble amounted to more than 30,000. I really don't understand why HK is doing this. Will the Singapore government follows too?
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