September 20, 2020

Wall Street Struggles but Ends Higher

Cisco Systems rose 5 percent after its chief executive, John T. Chambers, said in a memo to employees that recent missteps were “unacceptable.” Cisco has had three quarters of poor earnings. Analysts say the company is overly reliant on revenue from state and local governments, and Mr. Chambers promised that major changes were coming, although he offered few specifics.

Other technology companies also rose. Hewlett-Packard rose 2.2 percent, while Microsoft and the chip maker Qualcomm each rose about 1 percent. Broadcom jumped 3.4 percent after an Oppenheimer analyst said the semiconductor company would benefit from higher sales of mobile phones.

Chip stocks were still a big focus for investors after Texas Instruments said Monday that it would pay $6.5 billion in cash for the National Semiconductor Corporation.

Still, materials and energy companies fell, leaving broad market indicators struggling to say positive. Monsanto fell 5.6 percent after the world’s biggest seed company issued an earnings forecast for the year that fell below analysts’ expectations.

The Dow Jones industrial average was up 32.85, or 0.3 percent, to 12,426.75. While the Standard Poor’s 500-stock index gained 2.91 points, or 0.2 percent, to 1,335.54, and Nasdaq rose 8.63 points, or 0.3 percent, to 2,799.82..

In London, the FTSE 100 index was up 0.57 percent while the DAX in Frankfurt rose 0.55 percent. The CAC 40 in Paris rose 0.16 percent.

Bond prices fell, pushing yields up. The yield on the 10-year Treasury note rose to 3.54 percent from 3.49 percent late Tuesday.

In the oil markets, the apparent stalemate in Libya, which accounts for a little under 2 percent of daily oil production, kept prices high. The benchmark rate in New York was 7 cents a barrel higher at $108.41.

Interest rates considerations are taking center stage this week, with several central banks issuing policy statements this week.

Already the People’s Bank of China has raised its main interest rate for the fourth time since October as it tries to keep a lid on rising inflationary pressures.

The European Central Bank is poised raise rates on Thursday, the first increase in nearly three years, as it too worries about inflation. A quarter-percentage-point increase in the main rate to 1.25 percent has already been priced into the markets so investors will be more interested in what the central bank’s president, Jean-Claude Trichet, says in his monthly news conference.

Many analysts think that he will continue to sound a relatively hawkish tone and that has helped the euro clamber above $1.43 for the first time since last May.

“Today the euro is higher as investors revel in the prospect that today’s 1 percent short rate is soon to be 1.25 percent and are pinning their hopes on prospects for more changes from the European Central Bank,” said Andrew Wilkinson, senior market analyst at Interactive Brokers.

The euro’s ascent since it hit a multiyear low around $1.18 last summer has taken many currency traders by surprise, not least because Europe’s debt crisis continues to brew, with Portugal widely tipped to become the third euro country following Greece and Ireland to get an international bailout.

Though Portugal managed to raise about a billion euros ($1.4 billion) in a Treasury bill sale Wednesday, it had to pay substantially more to get the cash than it had to at previous auctions.

For now, interest rate policy remains the key to the euro’s gains, especially as the European bank’s peers, like the Federal Reserve and the Bank of Japan, are not expected to start raising borrowing costs just yet, though the Bank of England could well be tightening policy in the next month or two.

Though Portugal managed to raise about €1 billion ($1.4 billion) in a Treasury bill sale Wednesday, it had to pay substantially more to get the cash than it had to at previous auctions.

Also weighing on the dollar is the prospect of the first government shutdown in the United States for 15 years as Republicans and Democrats have yet to broker a budget deal.

Sal Guatieri, an analyst at BMO Capital Markets, said the economic impact depends on how long the shutdown, if it happens, lasts.

“The economy survived the three-week shutdown in late 1995-early 1996, but it’s also on a less firmer footing this time, with a 3-percentage point higher unemployment rate and a shakier housing market,” Mr. Guatieri said.

Earlier in Asia, Japan’s battered Nikkei 225 closed down 0.3 percent to 9,584.37, while Hong Kong’s Hang Seng gained 0.6 percent to 24,285.05 . In China, the Shanghai Composite Index returned from a holiday to close 1.1 percent higher at 3,001.36.

Article source: http://feeds.nytimes.com/click.phdo?i=0f63d6089a6fc4885898f212a6fb8387

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