Recap: Week Ending July 26, 2013
The lack of conviction in global markets has yet again led to tight narrow range trading in North American markets. Equity indexes in the US finished mixed with both the Dow Jones and NADAQ closing higher while the S&P 500 lagged. Without the in sync moves in the same direction US, equities are expected to trade horizontally for the time being. With this being said, the TSX as closed negative on the week as gold continued to march higher. This week was full of earnings, Caterpillar reported and missed estimates and also cut annual earning forecasts. As the news broke, CAT fell 4.2%. The weakness seen in CAT can be somewhat attributed to the fall in the price of gold. As Caterpillar supplies mining equipment, the demand for their equipment has been cut as gold prices fall and gold profit margins shrink. This upcoming Thursday the world’s largest gold producer, Barrick, releases earnings. Barrick is listed on both the NYSE and TSX and is expected to be a market both in either direction once earnings have been released. Barrick, being the largest gold producer in the world, has the luxury of the having the highest margins and is able to weather the gold downturn better than others. On the other hand, if Barrick does not meet expectations citing the decrease in the price of gold, it is believed that other producers will miss earnings.
This past week we also saw Expedia’s sales miss. Expedia dragged down the S&P, being the biggest lagger falling 27%. With a decline in sales at Expedia, investors are led to wonder if consumers are tightening their budgets and less spending on vacations. As vacations are commonly considered a luxury, many may not be able to afford them at the moment signally a possible slow down in the economy. In the past week Facebook also reported a jump in profits. The jump can be attributed to Mark Zuckerberg’s move to shift focus on mobile users. It is estimated that in the near future FB’s mobile revenue will overcome revenues received from desktop users. The big earnings surprise on the week by far was Apple which beat expectations pushing up share prices 3.8%. With this being said, many believe that Apple must introduce a new product shortly as they have yet to update both their iPod and iPhone since last year.
This upcoming week is loaded with key economic data which will set the tone moving forward in the markets. Traders will hear US pending home sales Monday followed by European consumer confidence Tuesday. On Tuesday, Germany will also release its Consumer Price Index for the month of July. Wednesday will be busy with Germany releasing its unemployment rate, the EU releasing its consumer Price Index and the US releasing its GDP. Closing off Wednesday the Fed will release their interest rate decision. On Thursday, both the ECB and BoE will release their interest rate decisions followed by the US ISM Manufacturing PMI. To close the week, on Friday the US will release its Nonfarm Payrolls.