Home' Trinidad and Tobago Guardian : October 19th 2014 Contents OCTOBER 19 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG9
The stock market capped a turbulent week with
a big gain Friday, a sign of renewed investor
confidence after days of gloomy economic
news. It was the latest large move for a market
which, with a few exceptions, has been on a
mostly downward track since last month.
Stocks have had four weeks of declines, leaving the Standard
& Poor's 500 index 6 percent below the record high from
Investors rode wild market swings for much of the week.
The Dow Jones industrial average plunged as much as 460
points Wednesday, then had one of its best days of the year
on Friday, when it soared more than 260 points following
strong earnings from big-name companies Morgan Stanley
and General Electric, as well as some encouraging U.S. economic
We had indiscriminate selling all week, and then today we
had indiscriminate buying,' said Jack Ablin, chief investment
officer at BMO Private Bank in Chicago.
Market watchers have warned investors to expect more
volatility than they have been used to in recent months. Their
concerns reflect weaker growth in Europe and what it could
mean for US corporate profits, as well as plunging oil prices.
The turmoil has not been limited to the floor of the New
York Stock Exchange. Bonds, overseas stock markets and com-
modities prices have all had big moves this week.
Most of the swings this week were related to fears about
global growth and not about the fundamentals of this market,'
said James Liu, global market strategist at JPMorgan Funds.
The VIX, a measure of how much volatility investors expect
in stocks, has risen from 12 in mid-September to as high as
26 this week, above its historical average of around 20. That's
still far below the readings of 80 it had at the height of the
2008 financial crisis.
This volatility, in a way, is purely psychological. This is the
market returning to a more normalized behavior,' Liu said.
The Dow advanced 263.17 points, or 1.6 per cent, to 16,380.41,
its second-best day of the year. The Standard & Poor's 500
index rose 24 points, or 1.3 per cent, to 1,886.76 and the
Nasdaq composite rose 41.05 points, or 1 per cent, to 4,258.44.
Investors rallied behind a group of corporate earnings results.
General Electric rose 2.4 per cent after its third-quarter
earnings were better than expected, helped by improved per-
formances at its aviation and oil and gas businesses. GE has
a broad range of businesses that cover so many parts of the
economy, from banking to building nuclear reactors, that
investors see its results as a bellwether for how US industry
is doing. GE rose 57 cents to US$24.82.
Textron, another industrial conglomerate, had the second-
biggest gain in the S&P 500 index after its own earnings came
in far ahead of expectations. Textron rose US$2.99, or 9
percent, to US$36.65.
Overall, the S&P 500's industrial sector rose nearly 2 per
cent, making it the best performing part of the market.
Investors also had two pieces of positive economic data to
A survey by the University of Michigan showed consumer
sentiment unexpectedly rose last month to 86.4, much higher
than the 84.3 expected by economists. It was the highest
reading for that survey since July 2007, right before the Great
The Commerce Department reported that construction
firms broke ground on more apartment complexes in September,
up 6.3 percent to a seasonally adjusted annual rate of 1.017
This week investors will be watching on one of the busiest
periods for Wall Street this earnings season. A total of 130
companies in the S&P 500 index will report quarterly results
next week, including big names like American Express, Cola-
Cola, AT&T and IBM.
On Friday oil prices rose slightly, but were still down 4 per
cent for the week on prospects of lower demand from a slowing
global economy and high supplies.
Benchmark US crude rose 5 cents to close at US$82.75 a
barrel on the New York Mercantile Exchange. Brent crude, a
benchmark for international oils used by many U.S. refineries,
rose 34 cents to close at US$86.16 on the ICE Futures exchange
In other energy futures trading on the NYMEX, wholesale
gasoline rose 2.2 cents to close at US$2.233 a gallon, heating
oil rose 2.8 cents to close at US$2.498 a gallon and natural
gas fell 3 cents to close at US$3.766 per 1,000 cubic feet
The price of gold fell US$2.20 to US$1,239 an ounce, silver
fell 11 cents to US$17.33 an ounce and copper rose two cents
to US$3 a pound. (AP)
US stocks end dramatic
week with rally Europe's economy sputters, oil prices plunge
and stocks start swinging wildly. Wall
Street's long dormant fear index' now pre-
dicts more turbulence ahead. The Chicago
Board Options Exchange's volatility index,
known as the VIX, doubled over the past
month: from 12 to 26. Although that's nowhere near the
80 reached in the financial crisis, the recent spike means
traders are bracing for more big jumps and steep drops.
Slowing growth in Europe and the developing world has
stirred up lingering doubts among investors just as the
Federal Reserve plans to wind down a bond-buying program
that many considered a driving force behind the stock
market's five-year run.
Traders have knocked the Standard & Poor's 500 index
down 4 percent this month and retreated into their old
hiding spots, U.S. and German government bonds.
All of a sudden, Wall Street's fear gauge looks relevant
We've gone from the S&P 500 hitting all-time highs
to losing all its gains for the year in just a month and a
half,' said JJ Kinahan, TD Ameritrade's chief strategist,
referring to the benchmark index for US stocks. There
has been a sea change in how people are viewing the mar-
The past week was especially turbulent. As markets
plunged Wednesday, the VIX reached levels last seen in
June 2012, when worries about the European debt crisis
gripped global markets and the U.S. economy's fitful growth
kept investors on edge. By Friday, as markets rallied, it slid
back to 20 --- its historical average.
The index gained popularity during the financial crisis
in 2008. With the global economy looking shaky, the fear
index' seemed to offer a useful look at what Wall Street
insiders thought would happen next. The VIX is based on
prices for S&P 500 options --- contracts to buy or sell the
stock index at a later date --- and measures how much
traders expect the stock market will move in the next 30
days. When the stock market slumps, traders rush to take
out insurance in the form of options contracts, pushing
the VIX up.
It's like the house is on fire, so you run to an insurance
agent,' Kinahan said. The VIX shows you what people are
willing to pay for insurance.'
The latest bout of jitters arrived abruptly. The US stock
market had been relatively calm for the bulk of the year.
In July, the VIX dropped to 10, its lowest level since February
2007. Markets were so calm this summer that some days
it appeared Wall Street had collectively nodded off on a
beach chair. Observers called it boring.
Investors kept an eye on conflicts in the Middle East,
rising tensions between the US and Russia and other wor-
risome news. But as long as interest rates stayed low and
companies kept hiring more workers, none of it sapped
their confidence in the stock market.
Things started to change in late September as reports
began piling up that Germany's economy, the largest in
Europe, was close to a recession. Economists warned of
a global slowdown. Major markets in Europe tanked and
the U.S. stock market began its slide.
The market's mood swings can make for a wild ride.
Take Wednesday. The S&P 500 plunged more than 1 per
cent in the opening minutes of trading following news of
a drop in retail sales in the US and more turmoil in Europe's
markets. But within an hour, it pulled the first in a number
of U-turns. The stock index bounced back to its starting
point, then dove more than 2 per cent by the afternoon.
It was shaping up to be the worst one-day loss this year.
As the closing bell neared, the market made one more
turn, heading higher to end a tumultuous Wednesday with
a loss of just 0.8 per cent.
The stock market had another turbulent session
Friday, capping off one of the more eventful weeks on
Wall Street in years. The Dow Jones industrial average
soared more than 250 points following strong earnings
from Morgan Stanley, General Electric and Textron as
well as some encouraging US economic reports.
The Dow Jones industrial average rose 263.17
points, or 1.6 per cent,
The Standard & Poor's 500 index rose 24 points,
or 1.3 per cent, to 1,886.76.
The Nasdaq composite gained 41.05 points, or
1 per cent, to 4,258.44.
For the week:
The Dow Jones industrial average fell 163.69 points,
or 1 per cent.
The Standard & Poor's 500 index fell 19.37 points,
or 1 per cent.
The Nasdaq composite lost 17.80 points, or 0.4 per cent.
For the year:
The Dow is down 196.25 points, or 1.2 per cent.
The S&P 500 index is up 38.40 points, or 2.1 per cent.
The Nasdaq is up 81.85 points, or 2 per cent.
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