Global markets were mixed Friday after a turbulent week that saw the
biggest one-day sell off on Wall Street in more than a year. The stock
plunge was blamed partly on news that the U.S. central bank could slow
its efforts to stimulate the recovering U.S. economy - and concerns
about a slowdown in China. But some analysts say the global selling
spree was an overreaction by investors who have grown accustomed to easy
money policies aimed at kickstarting the U.S. economy.
If the U.S. economic recovery is really gaining traction, as Fed Chief
Ben Bernanke said Wednesday, then why did the Dow Jones index plunge
more than 350 points on Thursday? Equities trader Jonathan Corpina said
it’s because a healthier economy means less help from the U.S. central
“Our economy is getting better, and now it’s time for us to see how we
can do it on our own,” said Corpina.
The Federal Reserve has been buying $85 billion in securities every
month to keep long-term interest rates low - making it easier for
businesses to borrow. Some say the monetary stimulus has boosted home
prices and helped reduce unemployment.
Economics professor Steven Kyle, at Cornell University, has his doubts.
He spoke to VOA via Skype.
“We still haven’t seen [house] prices come back to anywhere like we’d
like to see, and there are still millions of mortgages that are
underwater [homes worth less than the mortgage]. And on the employment
front, we are still in pretty bad shape. The unemployment rate has come
down, but that’s more because people are leaving the labor force than it
is because lots of them are getting jobs,” he said.
Fed has said it would gradually reduce bond purchases as the economy
strengthens and unemployment declines. Meantime, financial markets have
benefited greatly. Despite fears of a Fed pullback and worries about
China’s slowing economy, market economist Max Wolff says there’s no
reason to panic.
I think all-in stocks probably turn in a pretty decent year. But, I mean
I've been on the record for a while saying this: I think we probably
reached our maximum in April or May, I don't expect us to be above that
in a meaningful long-term sense at year-end," said Wolff.
Cornell professor Steven Kyle says investors overreacted. “I do think
it’s a little bit overblown, but the fact of the matter is, those guys
like to be the first one out the door whenever there’s a change in the
European stocks were down, while Asian and U.S. markets were mixed on
Friday as the dollar gained strength and bond yields rose higher.
Despite choppy trading on Wall Street - the Dow settled into positive
territory, in time for the closing bell.