A sharp plunge in Shanghai Composite Index Monday sent Asian stocks sharply lower as nervous investors went on a selling spree, reflecting a growing unease that the six-month old rally has gone ahead of any economic recovery.
The Shanghai Composite Index, which had declined nearly 3% on Friday, plunged 6.7% to 2,697. Hong Kong’s Hang Seng retreated 1.9%. In Japan, the Nikkei 225 stock average, which was up 200 points earlier in the session, fell 41.61 points, or 0.4%, to 10,492.53. In Yesterday’s landslide victory, the Democratic Party of Japan came to power ending an almost half-a-century rule by the Liberal Democratic Party. The yen strengthened, helped by the election results.
This morning’s U.S. stock futures show Wall Street is headed for a lower opening. Dow Jones industrial average futures fell 59, or 0.6%, to 9,477. Standard & Poor’s 500 index futures fell 5.70, or 0.6%, to 1,021.70, while Nasdaq 100 index futures fell 11, or 0.7%, to 1,631.50.
On Friday, U.S. stocks closed mostly lower after a report showing a drop in consumer confidence offset a rally in technology stocks that was fueled by better-than-expected results from Intel (NASDAQ:INTC) and Dell (NASDAQ:DELL). Also, Apple (NASDAQ:AAPL) announced that it entered into a deal with China Unicom to launch the iPhone in the country. The rally in tech shares was also helped by signs of a bottoming in the personal computer market after Intel (NASDAQ:INTC) raised its third quarter sales forecast to at least $8.8 billion from its prior forecast of $8.1 billion. The firm also raised its outlook on gross margin expectations.
The Dow Jones industrial average lost 36 points, or 0.4%. The S&P 500 index retreated 2 points or 0.2%. The Nasdaq composite added 1 point, or 0.1% and rose to its fresh 2009 high, closing at the highest point since October 1. Trading was light as most traders remained out of the market due to the summer vacations.
Among the S&P500 industry groups, financials led the gainers rising 1.2% during the week; consumer services shares rose 1.2%, followed by technology shares (+0.8%), industrials (+0.1%), and telecommunication stocks (+0.1%). The week saw financial stocks recording huge gains, helped by advances in AIG (NYSE:AIG), Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE).
Among the week’s losers, basic material and consumer goods shares fell 0.8%; utilities declined 0.7%; oil and gas shares dropped 0.3%, and health care issues retreated 0.2%.
Gains in retail stocks helped shares of consumer services companies record some gains. Luxury jeweler Tiffany (NYSE:TIF) reported better-than-expected earnings for the quarter, and also raised its full-year guidance. Housing shares showed some strength, helped by a report on new home sales, which revealed a more-than-expected, 9.6% advance in July.
