Sunday, March 27, 2011

US markets rise on Oracle and GDP data

US markets rose on Friday following Oracle's results, and 4th quarter GDP that was revised upwards. The S&P 500 gained 4.14 points or 0.32% to 1,313.80. The Dow rose 50.03 points or 0.41% to 12,220.59. 

Oracle forecast an increase in software sales for the current quarter, raising hopes of an increase in business spending. Meanwhile, US 4th quarter GDP was revised up from 2.8% to 3.1%. For the week, the S&P 500 gained 2.7%, while the Dow climbed 3.1%.

Euro zone troubles continue

The Prime Minister of Portugal resigned on Friday after failing to pass his austerity package in Parliament. Consequently, the yield on Portugal's 10-year government bonds rose to 7.79%, a record high. Making matters worse is the fact that Portugal will not be able to accept a bailout until after the election.

In addition, Moody's downgraded its ratings on about 30 Spanish banks this week, leaving only the ratings on the largest few intact.

Middle East fighting continues

Western fighter planes continued to bomb Gadaffi's forces in Libya. Meanwhile, unrest continued in Bahrain and Yemen. In Jordan, reformers and pro-government factions clashed on Saturday, resulting in 1 person dead and 330 wounded.

Looking ahead to next week

Investors will be paying attention to economic data next week, as the US government announces March employment data. Since next week is the last week of the quarter, fund managers will be doing the usual window-dressing.

Markets have been extremely resilient to bad news this week, especially following the resignation of the Portuguese Prime Minister, and the Portuguese 10-year bond reaching a yield of 7.79%. However, the markets' resiliency cannot be expected to continue indefinitely. The continued clashes in the Middle East will be another negative factor for markets. Unrest spreading to Jordan, Saudia Arabia's neighbour, is likely to cause investors to worry.

In addition, in Japan, one of the reactors appeared to be close to melting down on Saturday, after high amounts of a radioactive element were found in seawater near the reactor. Thus, investors can expect markets to head lower next week on the troubles in the euro zone, the Middle East and possibly Japan.

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