The Dow Jones Industrial Average and Standard & Poor’s 500 indexes have both gained only 0.2, respectively 0.3 per cent since Monday, while the NASDAQ Composite slipped 0.2 per cent for the week.
This week’s back and forth style started early on Monday, as the Berkshire Hathaway deal boosted both oil prices and overall stocks. However, this was erased by Tuesday following the surprise announcement coming from China that the country’s central bank has devaluated the yuan to provide more market movement flexibility in the context of the country’s on-going stock market crisis.
The Chinese announcement was against most analyst predictions, which saw currency devaluation as one of the least probable measures that the world’s second economy will apply. Thus, the response from investors was marred with fears of the announcement’s effects on the global market. Companies were mostly active in buying back shares of their stocks rather than investing in others, while investors in general preferred to assess the importance of the yuan move before venturing forth into both short and long term investments.
The overall tepid feel of the economy is now and then shaken up by growing technology companies, who have had an ostensibly good stock year overall. The Q2 reports have seen Google, Facebook, Netflix, Intel, Amazon and many others grow in revenue at healthy rates, prompting fears in some of the repetition of the 2000 Internet bubble burst.
However, most reputed analysts are dismissing such fears due to the fact that companies now have tried and tested progress paths in front of them, such as social media or e-commerce, as opposed to emergent late 90’s start-ups which were mostly diving into unknown territories. Some even use this potential to deny that tech companies form a valuation bubble – in their opinion, the value of companies like Apple or Amazon, which saw a sharp increase in the last years, is actually matched with what they really offer.
Most of their value also comes from significant international exposure. While Apple, Facebook, Google or Microsoft have long been global companies, lesser-tiered contenders such as Amazon or Netflix are also rapidly expanding into areas where some countries lack a strong competitor for their services. According to the S&P’s 500, almost 60 per cent of all U.S. tech companies’ revenue comes from abroad.
strong>Image Source: Christian Science Monitor