February 9, 2018 Market Outlook

U.S. Stock Market Enters Correction Mode

The Dow Jones suffered a second setback this week as it plunged 1,033 points on Thursday, marking the second-worst point drop in history. Monday’s nosedive was higher at 1,175 points. The dramatic session also sent the S&P 500 and Nasdaq reeling. With both the blue-chip index and the S&P 500 falling more than 10%, the stock market has entered correction mode.

The percentage drops on Thursday were not as scary during the 2008 financial crisis. However, investors are worried about a bull market that lasted more than a year but is now experiencing two weeks of panic selling. A total of $2.49 trillion has been wiped out from the S&P 500 and it appears it isn’t over.

Panic Selling in Wall Street Spreads to Asian Markets

The Asian markets plummeted on Friday following the panic selling on Wall Street. For the first time in the current crisis, the Shanghai Composite index in China and the Hang Seng in Hong Kong declined by 5.6% and 4.0% respectively.

Japan’s Nikkei 225 index and South Korea’s Kospi fell by as much as 3.5% and 1.9% respectively. Many big investors are unwinding trades after long months of low rates.

Data from the S&P Dow Jones Indices show that the total losses for global stock markets are bigger than the losses in the U.S. About $5.20 trillion have been wiped out already.

Rising Energy Exports to Boost U.S. Geopolitical Influence

U.S. President Donald Trump is using rising energy exports to the hilt as part of his ‘energy dominance’ agenda.  By offering U.S. fuel as alternative, European countries could be weaned off Russian energy imports and do away with Moscow’s ability to shut off natural gas supplies whenever there are pricing disputes.

Poland has entered into contracts for the importation of U.S. liquefied natural gas (LNG), crude oil, and coal. The Polish government also announced it will not renew their exclusive but troubling gas supply deal with Russia’s state-owned Gazprom when it expires in 2022. Other countries have signed contracts with the U.S. for the first time.

Qualcomm Rejects Broadcom Offer but Open to Meet

Broadcom sweetened its original buyout offer to $121 billion but the U.S. semiconductor company Qualcomm Inc. rejected it on Thursday. Instead, Qualcomm proposed a meeting to go over what it called the bid’s “serious deficiencies in value and certainty.”

Qualcomm is striking a balance between continued opposition to Broadcom’s takeover attempt and giving in to the calls of some shareholders to talk with its rival and work out an attractive deal. Broadcom wants the meeting by this weekend but the earliest Qualcomm can meet is on Tuesday.

Twitter Shares Jump After Reporting First-Ever Profit

Twitter delivered its first-ever quarterly net profit on Thursday which pushed its stock price to its highest level in two years. Advertising revenues grew as more advertisers are beginning to spread their online spending beyond Facebook and Google.

User growth also contributed to the $91mllion fourth quarter income. After several years of skepticism, Wall Street is taking a second look at smaller internet companies such as Twitter and Snap and how they could challenge the growing dominance of Google and Facebook. The two giants account for more than three-quarters of global spending on digital advertising.

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