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Date Posted: 23:00:23 05/24/13 Fri
Author: Noted the photo is dated Thursday March 14th 2013
Subject: US markets turn sober after Japan plunge Friday 24/5/2013

US markets turn sober after Japan plunge
AFP – 16 hours ago
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Traders work on the floor of the stock exchange on March 14, 2013 in New York City. Traders remained cautious Friday, with stocks virtually unchanged, leaving the markets lower for the five-day period after three straight weeks in which the Dow and S&P finished at all-time highs.


The 7.3 percent plunge in Japanese stocks during the week injected needed sobriety into US markets, but they showed a resilience that cheered investors worried about protecting the year's gains.

The drop in Tokyo Thursday -- a modest correction in the context of the Nikkei 225's 21 percent climb in five weeks -- sent other Asian and European markets sinking by more than two percent.

But US stocks fended off the selling pressure, the S&P 500 finishing just 0.28 percent lower for the day, sending a sigh of relief around the world.

Traders remained cautious Friday, with stocks virtually unchanged for the day. That left the markets lower for the five-day period after three straight weeks in which the Dow and S&P finished at all-time highs.

"Our markets have been pretty extended, and certainly things don't go up for ever," said Michael James of Wedbush Securities.

"For the market to take a bit of a pause is certainly warranted."

The Dow Jones Industrial Average closed the week down 0.3 percent, at 15,303.10.

The broader S&P 500 lost 1.1 percent at 1,649.60, and the Nasdaq Composite was also down 1.1 percent, at 3,459.14.

The week was uneasy, as shown by the whiplash Wednesday over differing interpretations of Federal Reserve Chairman Ben Bernanke's testimony on the economy to Congress.

Shares rose when Bernanke warned that preliminary tightening of the Fed's easy-money policies would be risky, an initial signal that the Fed's quantitative-easing program would remain unchanged.

But when he was reported shortly later predicting that QE could be tapered off starting "in the next few meetings" of Fed policy makers, traders reversed course, ignoring Bernanke's conditional "if we see continued improvement and we have confidence that that is going to be sustained."

Ultimately Bernanke's message was that the Fed still needs to see a few months' worth of good data before pulling in its QE bond purchases.

But the mixed interpretation was enough to discourage strong buying of shares for the rest of the week.

Confirming the caution was the surprise contraction in HSBC's China manufacturing index for May reported Thursday, that served as the catalyst for the sell-off in Asia and Europe.

"Uncertainty regarding the timing of when the Federal Reserve will taper its asset purchases and festering uneasiness toward Chinese economic growth continue to stymie stocks," concluded analysts at Charles Schwab & Co.

The markets nevertheless continued to be supported by an inflow of funds from small investors seeking to share the gains that remain strong -- so far this year the Dow is up 16.7 percent, the S&P 15.5 percent, and the Nasdaq 14.3 percent.

But analysts said that going ahead investors will need a little more clarity on the economic situation in the United States and abroad before markets make their next move.

"We had kind of three down days in a row, so that raises some questions," said Mace Blicksilver of Marblehead Asset Management.

"A lot of dust has been kicked up through the last few sessions, and notwithstanding yesterday's comeback effort, it is a little too early to say the dust has settled," Patrick O'Hare of Briefing.com said Friday.

US data in the coming week should offer some direction: the Conference Board's consumer confidence reading on Tuesday, a revised estimate of first-quarter economic growth on Thursday, and personal income and expenditures on Friday.

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