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US stocks have followed a general downwards trend at the end of the trading week on Friday, following less than expected profit growth by some high-profile companies in Q2 reports, a drop in home sales and some mild drawbacks from China’s situation.
The Dow Jones industrial average slid by 2.9 per cent through the last week, standing now at 17,568.53, while the Standard & Poor’s index also took a 2.2 percent hit down to its Friday 2,079.65. More surprisingly, the NASDAQ Composite Index, which ended the previous week on a historic high, also went down by 2.3 per cent at 5,088.63.
One of the biggest hits was given by Apple’s Q2 2015 earnings report, with its 38 per cent gain in profits being well under specialist’s forecasts. This resulted in investor starting to sell away Apple shares, which went down by 4 per cent. This also affected Google, who started the week high from its 16 per cent one-day growth from previous Thursday but lost 7.2 per cent in stock value.
Analysts are suggesting that the drop in equities has multiple causes. Firstly, sales of new homes were announced to be on the decline for June, as new single-family homes sales hit their lowest level in the past seven months. This wasn’t so much a hit for the housing market though, as to compensate previously owned homes sales rose to their highest annualized rate since before the recession.
The drop in investor optimism might have also been related to companies who reached or even beat profit predictions, but had lower or inconsistent revenue gains and had poor growth indicators, such as Microsoft, McDonald’s or American Express. The Chinese manufacturing market also turned out weak in the context of the country’s struggle with the recent stock fall, raising concern on global growth and lowering commodity prices.
Some analysts consider that the Standard & Poor’s index to be overvalued at its current levels, claiming that low market revenues and slow growth will not be able to sustain it. However, with the economy itself on the rise, as highlighted by the last employment reports which saw unemployment claims at their lowest since 1973, there is optimism that it will help drive earnings up with time.
Next week will be important in this regard, as a Federal Reserve meeting is expected to update its position concerning a previously announced interest rise from its current 0 level. Investors are mostly critical of the upcoming measure, which was put into effect to stimulate recession and post-recession economic growth, claiming that bringing it into effect might slow down economic growth.
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