US stock market review: The Fed’s tangle over the policy direction made the US stock market upward momentum un-sustainable. Despite the payrolls data released last week topped the consensus estimate, the rise in the unemployment rate still represents that to the risks of the U.S. economic recovery are much bigger than we have thought. In addition, the uncertainty of the situation in Europe is also enhanced, due to the problems of Greece, Spain as well as Italy. The settlement process of the debt crisis in Europe is increasingly becoming difficult; the effectiveness of the efforts of the European Central Bank and the EU is not significant, and the implementation of relief measures has met lots of obstacles. The US stock market is in the face of resistance. The Dow Jones Industrail Average climbed to nearly 13,200 points and got pressure, and the short-term taking pressure has begun to increase.
The US dollar was hovering around 82.4 level over the past few days after a plunge. Investors are worried about the later movements of the US stock market, pushing capital flow to dollar for safe haven, and bring support to the US dollars. The euro zone’s economic growth is dragged down by the debt crisis in Europe, and the contradictions among the European countries have brought about lots of obstacles to the settlement of the crisis. Although the European Union and the European Central Bank have made unremitting efforts to resolve the debt crisis, but it is difficult for these efforts to bear friuts if the contradictions among these countries are still there.Recently, the rumors that Spain is in need of a comprehensive bailout once again hit the market sentiment.
Germany has been holding an opposite attitude on the ECB’s program to purchase debts, deepening the market concerns over the stability of the euro zone. If the ECB cannot take a clear-cut stand on this issue, then the credibility of the ECB among the in European countries will inevitably continue to be questioned. What’s more, the future measures and policies to solve the debt problems will be more difficult to be implemented.
The international rating agency Standard & Poor’s on Tuesday cut the outlook for Greece’s long-term debt rating to “negative”, this means that if Greece can not obtain enough bailout funds from the EU and the IMF as scheduled, its sovereign debt rating will be inevitably downgraded to a lower level, then, perhaps triggering a fierce storm.
The Fed announced better-than-expected payrolls data last week, boosting the US stock market, meanwhile ease the investors concerns over the status of the U.S. economy recovery. But this also suppresses the possibility that the Fed introduces QE3 or other easing measures. Actually, the outlook for the U.S. economy is not optimistic; as burdened by the debt crisis in Europe, combined with the weak improvements in the job market, consumer market and manufacturing industry, the U.S. economy recovery is getting slower and slower. The combined effect of a series of economic stimulus measures implemented by the Fed early has weakened a lot, also reducing the power for the US economic growth. Of course, the Fed has also seen the existence of the hidden dangers of the U.S. economy, this is the reason why the Fed has not issued a clear statement over whether to close the door for QE3 or not. After all, if the current recovery achievements cannot be consolidated, then, once the economy re-falls into the recession whirlpool, there will need much more driving force to make the economy to get back on the right track.
The investor optimism has temporarily stopped rising while the concerns about the U.S. economy and the outlook for the US stock market are increasing. Therefore we should be still cautious about the future market movements.