10 biggest market-moving events this week

Reuters

MarketWatch rounded up the 10 most important news events of the past week. We focused on market-related issues, but we've included other subjects of great interest to readers.

Woe is Portugal

The biggest shock of the week came Wednesday, when Banque Privee Espírito Santo SA of Portugal said its parent company, Espírito Santo International SA, would delay repayment of short-term notes that had been sold to private-banking clients through a Swiss subsidiary.

The parent company, which is privately held, announced in May it was in an "extremely negative financial position" because it had under-reserved for credit risk and had incorrectly valued assets.

The Dow Jones Industrial Average was down well over 100 points in early trading Thursday, but ended with a rather modest decline of less than 71 points, or 0.4%, to 16,915.07, despite headlines screaming of rising interest rates for Portuguese government bonds. But the worries were overblown, and when considering all the turmoil over the past several years, yields of less than 4.0% for 10-year Portugal bonds just aren't that high.

But European markets rebounded Friday, and yields on Portuguese 10-year bonds declined 8 basis points to 3.87%.

William Watts dug deeper into various aspects of Eurozone risk in 5 things to know about Banco Espirito Santo and Europe. Diana Furchtgott-Roth said the crisis may be the tip of the iceberg.

Dow 17,000

After the Dow Jones Industrial Average (DJIA)  hit its historic 17,000 milestone, David Weidner spelled out the reasons why this bull market is different from previous ones, in an article that drew over 400 comments from readers.

The Federal Reserve's unprecedented policies of greatly expanding its balance sheet to hold long-term interest rates down, while keeping short-term rates near zero since late 2008, has worked. Asset prices continue to recover, and we've all gotten away with something, because the official inflation rate has remained roughly 2%.

But Weidner pointed out that most investors haven't been buying stocks, and U.S. GDP growth is nowhere near where it was during the previous bull market.

The Dow was down 1% for the week to close Friday at 16,943.81.

Fed minutes

The minutes of the Federal Open Market Committee's June 17-18 meeting, released Wednesday, indicated the wind-down of the Federal Reserve's "QE3" purchases of long-term U.S. Treasury and agency mortgage-backed securities will be completed in October, two months earlier than expected by many economists. QE3 was designed to hold down long-term interest rates, and the end of the bond-buying program sets the stage for a higher federal funds rate, which dictates commercial rates.

The news from the Fed helped push down stocks Thursday, because equity prices have a tendency to react negatively to indications of less accommodative interest rate policies.

In an interview with Bloomberg, Federal Reserve Bank of St. Louis President James Bullard said the continued decline in U.S. unemployment was likely to push inflation to 2.4% by the end of 2015, above the Fed's long-term target of 2%. This could lead to a significant increase in short-term interest rates, which could spook equity investors, but would also be welcome by bankers, who are tired of seeing their net interest margins narrow.

Layoffs

It has been a while since we have seen almost daily headlines of massive layoffs across many industries, but General Cable Corp. (BGC) on Wednesday announced a restructuring that would "result in the elimination of approximately 1,000 positions globally, representing nearly 7% of the company's workforce."

General Cable expects to realize annual savings of $75 million in early 2016 and will record pretax charges of $200 million for the restructuring. The company's shares declined 4% Thursday and went down another 2% Friday to close at $23.72.

Bank earnings

Wells Fargo & Co. (WFC) on Friday kicked off earnings season for the nation's largest banks by meeting the consensus second-quarter earnings estimate of $1.01 a share, among analysts polled by FactSet.

The bank's total revenue was down 1% from a year earlier to $21.07 billion, although it beat the consensus estimate of $20.76 billion. The year-over-year revenue decline reflected the industry trend of lower mortgage-banking volume. But the good news was that, quarter over quarter, mortgage-banking revenue rose 14% to $1.72 billion.