World markets were mostly in the red last week.
On Wall Street and Asian markets, stock indexes fell sharply last week as the technology sector came under pressure again, while European indexes recorded mixed results.
The Dow Jones index fell 0.9 percent, to 52,146 points, while the S&P 500 fell 1.6 percent, to 7,457 points, and the Nasdaq 2.9 percent, to 25,520 points.
The decline in the index is mainly a consequence of the decline in the prices of technology stocks, primarily chip manufacturers. The PHLX index of chip makers has fallen almost 18 percent since the beginning of July.
The prices of those shares rise strongly one day, and fall sharply the next, because some analysts believe that the prices in that sector are too high, after strong growth in recent years, while others believe that there is still room for their growth.
The S&P 500 fell primarily due to a large share of chipmaker stocks. Three or four years ago, their share in the index was around eight percent, and now it is more than 20 percent. If you look at the rest of the market, you’ll see that it’s pretty stable, says Paul Nolte, strategist at Murphy & Sylvest.
Share prices of the chip maker have been rising strongly for years, and more than 65 percent since the beginning of this year alone, while the S&P 500 rose about 9 percent during that period. Therefore, expectations regarding the earnings of these companies are high.
While the technology sector has fluctuated significantly in recent months, other sectors are significantly more stable. This is explained by the stable growth of the economy and the solid business results of the companies, say analysts.
Of the 49 companies from the S&P 500 index that have published financial reports so far, 90 percent of them achieved better than expected results, reports SEEbiz.
That is why analysts polled by Reuters expect second-quarter earnings growth of 26 percent year-on-year. In the technology sector, earnings are expected to grow by an average of 65.5 percent.
European stock indexes had mixed results last week. London’s FTSE index rose almost 1 percent, to 10,600 points, while Frankfurt’s DAX fell 0.95 percent, to 24,830 points. The Paris CAC remained almost unchanged at 8,338 points.
Uncertainty in the markets is a consequence of the crisis in the Middle East and the strong rise in oil prices, which could stimulate the growth of inflation. This could lead to an increase in central bank interest rates and a slowdown in economic growth.
