For the week ended 11 July 2014, S&P 500 and Dow Jones Industrial Average fell by 0.9% (-17.87 points) and 0.7% (-124.45 points), respectively. S&P 500 closed the week at the level of 1,967.57, while DJIA closed at 16,943.81. The Standard & Poor’s 500 Index saw its largest weekly drop since early April, but much of the selling took place among small-caps
The week’s developments were:
1) New worries about European financial system based on the revelation of financial problems at a major Portuguese bank, Banco Espírito Santo. The bank has difficulties to pay coupons on some of its debt.
2) According to FOMC minutes of June, The US Federal Reserve plans to end the gradual tapering of its stimulus program of purchasing Treasury bonds and mortgage-backed securities by October.
3) Early results of second-quarter earnings of a few companies may have increased the worries about expected strong growth for the economy.
4) Weekly initial jobless claims for unemployment benefits fell to a seasonally adjusted 304,000 in the week ended 5 July, while the four-week moving average of claims fell to 311,500. That supports the improvement in the job market.
5) China’s exports grew 7.2% year-over-year in June, bolstered by rising US consumer demand. China’s trade surplus was $31.6 billion in June, down from $37.99 billion in May. Imports grew by 6% year-over-year after declining 1.6% in May. Imports from China now account for 20% of all US imports, up from 16% in 2008.