Stocks close out worst week since June
US stocks faced a fifth consecutive day of selloffs Friday, capping off the market’s worst weekly performance since June. The markets declined on speculation about US Federal Reserve bond tapering later this year, which was fueled by better-than-expected data on trade and services sector growth. On Thursday the US Department of Labor also reported better-than-expected jobless claims for the week ended August 3, which lent further support for an autumn bond taper.
The S&P 500 hit an all-time high last Friday, reaching 1,709.67 before declining more than three-quarters of a percent this week. The US benchmark was down another 0.36 percent Friday to close at 1,691.42. The Dow Jones Industrial Average followed the S&P lower, declining 0.47 percent to 15,425.50. The NASDAQ Composite was down another quarter percent to 3,660.11.
In addition to concerns about the future of the Fed’s asset purchase program, the markets are likely still adjusting to the new highs, which were triggered by better-than-expected second quarter earnings. Of the 432 S&P 500 companies to report second quarter earnings, more than half beat analysts’ sales projections, and more than 70 percent beat profit expectations.
Friday’s losses were led by Bank of America, which fell 1.1 percent to $14.45 a share. The losses were triggered by a series of federal legal actions concerning the sale of the bank’s past mortgage-backed bonds, which were at the centre of the 2008 global financial downturn.
A mass selloff of exchange traded funded also helped trigger the market’s decline. According to Bloomberg, investors yanked $1.2 billion from US ETFs over the past four days. ETFs enjoyed deposits valued at $32 billion in July, the most since September 2008.
Speculation concerning monetary policy will continue to heighten ahead of the September FOMC policy meetings. The US economy’s surge in recent months has increased expectations for a taper in the neighbourhood of $20 billion in September.
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