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Wan LixinOpinion deputy editor of Shanghai Daily
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Stocks end mixed as savings rate jumps
Source: Agencies |
June 27, 2009, Saturday
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CONSUMERS are saving more than they're spending, and that has investors worried.
Stocks capped a choppy week of trading with a mixed finish yesterday after the Commerce Department reported that personal spending, incomes and savings all rose in May. What troubled investors was that the savings rate soared to 6.9 percent, a 15-year high, while spending rose by a modest 0.3 percent.
The Dow fell 34.01, or 0.4 percent, yesterday to 8,438.39. The S&P 500 index fell 1.36, or 0.2 percent, to 918.90. The Nasdaq composite index rose 8.68, or 0.5 percent, to 1,838.22.
For the week, the Dow lost 101 points, or 1.2 percent. The S&P 500 index fell 0.3 percent and the Nasdaq rose 0.6 percent. The Dow is down 3.9 percent for the year, while the S&P 500 and Nasdaq are higher.
The personal income data suggested that consumers are being very careful with their money. That's good for the individual, but not great for the overall economy in the short-term.
Phil Orlando, chief equity market strategist at Federated Investors, said he expects the savings rate to eventually hit 10 percent before it eases. The savings rate had been 5.6 percent in April, and annual savings rates were below 1 percent from 2005 through 2007.
"If people ramp up savings that aggressively, that is going to result in less GDP recovery than ordinarily would be the case," Orlando said.
Investors have worried that a 35.8 percent rally in the Standard & Poor's 500 index from a 12-year low on March 9 is overdone, because an economic recovery may be further out than many had earlier hoped. But with the end of the quarter on Tuesday some portfolio managers could be eager to take the market higher to burnish their numbers for the April-June period.
The University of Michigan reported a rise in consumer sentiment in June, better than the flat reading expected by analysts. But even that report could not trigger a rally.
The technology-dominated Nasdaq did better than the other major indexes, though, thanks in large part to Palm Inc. The smartphone maker posted a narrower loss for its fiscal fourth quarter than analysts expected. The stock rose US$2.20, or 15.7 percent, to US$16.22.
The Russell 2000 index of smaller companies rose 4.04, or 0.8 percent, to 513.22.
Advancing stocks outnumbered declining stocks 3-to-2 on the New York Stock Exchange, where volume came to 2.3 billion, double the 1.2 billion logged Thursday.
Volume was heavy because of the annual reconstitution of the Russell 3000 index, which forced investors to buy and sell hundreds of stocks to match the new makeup of the indexes.
Stocks capped a choppy week of trading with a mixed finish yesterday after the Commerce Department reported that personal spending, incomes and savings all rose in May. What troubled investors was that the savings rate soared to 6.9 percent, a 15-year high, while spending rose by a modest 0.3 percent.
The Dow fell 34.01, or 0.4 percent, yesterday to 8,438.39. The S&P 500 index fell 1.36, or 0.2 percent, to 918.90. The Nasdaq composite index rose 8.68, or 0.5 percent, to 1,838.22.
For the week, the Dow lost 101 points, or 1.2 percent. The S&P 500 index fell 0.3 percent and the Nasdaq rose 0.6 percent. The Dow is down 3.9 percent for the year, while the S&P 500 and Nasdaq are higher.
The personal income data suggested that consumers are being very careful with their money. That's good for the individual, but not great for the overall economy in the short-term.
Phil Orlando, chief equity market strategist at Federated Investors, said he expects the savings rate to eventually hit 10 percent before it eases. The savings rate had been 5.6 percent in April, and annual savings rates were below 1 percent from 2005 through 2007.
"If people ramp up savings that aggressively, that is going to result in less GDP recovery than ordinarily would be the case," Orlando said.
Investors have worried that a 35.8 percent rally in the Standard & Poor's 500 index from a 12-year low on March 9 is overdone, because an economic recovery may be further out than many had earlier hoped. But with the end of the quarter on Tuesday some portfolio managers could be eager to take the market higher to burnish their numbers for the April-June period.
The University of Michigan reported a rise in consumer sentiment in June, better than the flat reading expected by analysts. But even that report could not trigger a rally.
The technology-dominated Nasdaq did better than the other major indexes, though, thanks in large part to Palm Inc. The smartphone maker posted a narrower loss for its fiscal fourth quarter than analysts expected. The stock rose US$2.20, or 15.7 percent, to US$16.22.
The Russell 2000 index of smaller companies rose 4.04, or 0.8 percent, to 513.22.
Advancing stocks outnumbered declining stocks 3-to-2 on the New York Stock Exchange, where volume came to 2.3 billion, double the 1.2 billion logged Thursday.
Volume was heavy because of the annual reconstitution of the Russell 3000 index, which forced investors to buy and sell hundreds of stocks to match the new makeup of the indexes.
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