The first week of trading in the new year brought such highs and lows that few analysts can say with certainty what will happen next. But it's a good bet that many investors are longing for a little stability after a crazy week that ended with another major sell-off.
The Dow Jones industrial average tumbled 250.40 points, or 2.3 percent, to 10,662.01 Friday. Financials, cyclicals, biotechs and retailers saw the most damage, reports Renay San Miguel of CBS MarketWatch.
The tech-soaked Nasdaq dropped 159.18 points to close at 2,407.65.
Internet, hardware, chip and software stocks took the brunt of the selling.
All of this happened despite a December jobs report that was weaker than expected and optimism that the Federal Reserve might lower interest rates again later this month as it did in a surprise move last week.
Worried that the economy is sinking fast, the Federal Reserve last week lowered interest rates by half a percentage point, and further rate cuts are expected.
Economists say it's too early to say unequivocally that there will be no recession, and most predict that there will be at least two more quarters of pain before the Fed's interest-rate medicine takes full effect.
"The Fed is in some ways a lagging indicator in that it follows the economy," said Sung Won Sohn, chief economist at Wells Fargo & Co. "Lowering interest rates is a validation, a proof, that the economy is weak."
The Fed hopes its interest rate cuts will boost consumer and capital spending, which have been the main engines of economic growth for the past 10 years.
"Retail sales have obviously weakened," said David Orr, chief economist at First Union Corp. in Charlotte, N.C. "What's hurting the most right now are the big-ticket, interest-sensitive consumer items like cars and TVs and other things that are postponable."
Europeans welcomed the Fed action and some economists even predict the European Central Bank and the Bank of England might take similar steps to trim the cost of borrowing on this side of the Atlantic.
Such a move could help businesses that sell houses, cars and other big-ticket items but may have a greater impact in Europe by causing the U.S. dollar, and perhaps the British pound, to weaken against the euro.
A parade of profit warnings seemed to beat back hopes of building on last Wednesday's Fed-inspired rally. Nordstrom, Delta Airlines and Borders all said their fourth-quarter profits would not meet expectations. Delta blamed holiday cancellations because of bad weather and Nordstrom and Borders cited weak holiday sales.
Investors this week will have their eyes on Alcoa, Yahoo!, Motorrola, Ariba, Doubleclcik and Rambus, all among the companies scheduled to release fourth-quarter results.
More economic indicators are coming, too. The Producer Price Index and the latest figures on retail sales and wholesale inventory are to be released this week.
Asian stock markets closed generally mixed Monday, with prices slumping in Taipei but surging in Bangkok.
On the London Stock Exchange, the Financial Times-Stock Exchange 100-share index was down 10.9 points at 6,187.2 at noon.
Taiwan shares fell sharply, with the key index losing 2 percent after worries over the future direction of U.S. technology stocks prompted investors to take profits following a recent rally, analysts said. The benchmark Weighted Price Index of the Taiwan Stock Exchange fell 107.02 points to 5,188.51, following an 8.2 percent increase in the past two sessions.
Thai stocks surged on buying across the board due to improved market sentiment after the Thai Rak Thai party's victory in the country's general election. The Stock Exchange of Thailand's SET index rose 9.08 points, or 3.2 percent, to 295.84 .
In Hong Kong, the blue-chip Hang Seng Index slipped 11.08 points, or 0.07 percent, closing at 15,436.53. On Friday, the index had surged 212.58 points, or 1.4 percent.
Brokers attributed the index's decline to selective profit-taking following last week's sharp gains.
Singapore shares also closed lower. The Straits Times Index fell 23.62 points, or 1.2 percent, to 1,951.20.
The market was closed in Tokyo for a holiday.
- MANILA: Philippine shares closed higher, boosted by gains on interest rate-sensitive stocks following the central bank's decision Friday to trim its overnight rates. The 30-company Philippine Stock Exchange Index rose 25.30 points, or 1.7 percent, to 1,494.38.
- WELLINGTON: New Zealand shares closed slightly lower. The NZSE-40 Capital Index slipped 5.54 points, 0.3 percent, to 1,909.56.
- SYDNEY: The Australian share market closed lower following sharp losses in U.S. equities Friday. The ll Ordinaries Index fell 33.2 points, or 1.0 percent, to 3,207.5.
- SEOUL: South Korean shares closed higher on continued active foreign buying. The Korea Composite Stock Price Index, or Kospi, rose 5.80 points, or 1.0 percent, to 586.65.
- JAKARTA: Indonesian share prices closed lower on profit-taking. The Composite Index fell 0.7 percent, or 3.054 points, to 415.766.
- KUALA LUMPUR: Malaysian shares closed higher. The Composite Index, which tracks 100 blue-chip stocks, rose 0.7 percent, or 4.82 points, to 675.00.
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