US technology shares surge

US equities performed strongly during September. Medium-sized and smaller companies performed better than larger companies, suggesting investors have grown somewhat more sanguine about the prospects for the domestic and global economic recovery.

During the second quarter of 2010, US corporate profits rose by 3% quarter on quarter, and by 37% year on year.The Dow Jones Industrial Average index rose by 7.7% during the month and by more than 10% over the third quarter of 2010. Meanwhile, the technology-heavy Nasdaq index surged by more than 12% during September, suggesting investors’ appetite for technology and growth-related stocks has increased. During the month, software manufacturer Oracle reported better-than-expected profits and sales for its first quarter.

The Conference Board’s index of US leading indicators rose more strongly than expected during August, boosting hopes economic expansion will continue to gather pace. The US economy expanded by 1.7% year on year during the second quarter, which was better than the growth of 1.6% that had previously been estimated.

Even so, a combination of relatively anaemic economic growth and low inflation has prompted the US Federal Reserve to reassure investors it continues to keep a close eye on economic and financial developments, and “is prepared to provide additional accommodation if needed”. This news boosted hopes the US central bank will not allow the country to slide back into recession.

Export activity showed signs of recovery as the US trade deficit narrowed by more than expected during July and US exports rose to reach their highest level since August 2008. This news boosted hopes overseas demand for American products is picking up.

US consumer spending rose at its fastest pace since the first quarter of 2007 – however, the rate of unemployment remains stubbornly high at 9.6%, and this is likely to put a brake on consumers’ ability to spend.
The Fed warned that spending is likely to remain constrained by unemployment, tight credit conditions and a depressed housing market. According to the Federal Housing Finance Agency, US house prices fell by an annualised 3.3% during July – the drop bing attributed to an increase in supply resulting from a rise in the number of repossessed properties.

Household net worth declined during the second quarter of 2010, weakened by a fall in share prices. Meanwhile consumer confidence unexpectedly fell during September to reach a one-year low. The decline was attributed to a drop in confidence among upper-income households.


To go to our main site please follow this link www.sterlingfs.co.uk