Local stocks still in the firing line
By BEN READY
Monday 9 July 2001
The sharemarket is set to continue its downward spiral today after hopes of an economic recovery in the United States were dealt another blow on Friday, driving Wall Street sharply lower.
Profit warnings by data storage giant EMC and microchip maker Advanced Micro Devices belted hopes of a broader earnings recovery, undermining optimism they would rebound this year.
The news prompted heavy selling by investors, with the Standard Poor's 500 Index crumbling to its biggest drop in three months.
The S&P 500 fell 28.65 points to 1190.59 while the Nasdaq Composite Index dropped for a fourth day, falling 75.95, or 3.7per cent, to 2004.16 points.
The benchmark Dow Jones Industrial Average sank 227.18, or 2.2 per cent, to 10,252.68, taking overall losses for the first week of the new financial year to 2.4 per cent.
The renewed bout of selling on Wall Street is expected to flow into the local market, with Australia's relative strength over the past couple of months to come under renewed pressure.
On Friday, the All Ordinaries Index closed 23.1 points down at 3302.2 points while the benchmark S&P/ASX 200 fell 23.9 points to 3353.9.
CommSec chief economist Craig James said some investors were questioning the ability of the local market to make further gains given its relatively strong performance. "Since late March, it has effectively been one-way traffic higher for the Australian sharemarket," he said. "So the recent correction should be regarded as a healthy development."
After hitting a record high of 3425.2 points on the last trading day of the past financial year, the All Ordinaries retreated nearly 3.6per cent last week to its lowest level since mid-May.
The biggest contributor to the falling local market last week was Telstra, with a steady stream of bad news. These included a profit warning from UK telecoms-equipment maker Marconi and negative news about its partner in Asia, Pacific Century CyberWorks, pushing the stock to three-year lows. The shares lost a further 11 cents, or 2.13 per cent, to $5.05 on Friday, after briefly falling below $5 to $4.98.
Adding uncertainty to the market outlook this week is a host of economic news that may, or may not, give investors a firmer handle on the outlook for the domestic economy.
The highlight of the week will be tomorrow's speech by Reserve Bank of Australia governor Ian Macfarlane to business economists, which may give some indication of future movement on interest rates.
-AAP
This story was found at: theage.com.au |
