Recap: Week Ending September 20, 2013

September 22, 2013

US equity markets rocketed to new highs this week following news out the US Federal Reserve on Wednesday that the current level of bond buying will remain constant until further notice. Following the news from the FED both the Dow Jones Industrials and S&P 500 hit all new time highs with the Dow peaking at 15,709 and the S&P topping out at 1,709. Global equity markets rallied on the news with both London and German markets closing in the green for the week. The news from the FED comes after months of rumors and possible hints from FED Chairman Ben Bernanke that the current $85B a month bond buying quantitative easing program may slow in September. During the course of the summer, US equities flip flopped in both directions unsure about the direction and further and intentions of the Federal Reserve. Both investors and traders are breathing a sigh of relief as they can rest assured that QE will continue, adding value to equities. It must also be noted that as QE continues, the US target rate will remain at 0.25%. It appears that prior the FED’s decision gold was pricing in a reduction in QE, however, when the news broke gold soared over $50 peaking out at just under $1380. Since the announcement, gold has lost almost all of its gains made on Wednesday as investors continue to believe that quantitative easing will slowly end soon, or as the media describes it, tapering. The 30Year US Treasury rose following the news on QE that bonds will continue to be purchased. Bonds have really taken a beating following the possibility of tapering as many believe the rally in bonds from 2011 to the end of 2012 can be attributed to QE. On the contrary, the US Dollar Index, which tracks the moves of the US Dollar across 5 major pairs sold off following the news about the continuation of QE.

BlackBerry warned Friday that it will report a huge quarterly loss next week. The news got even worse as the Canadian phone maker announced that it will be cutting about 4,500 workers from its global staff, which is equivalent to roughly a third of its work force. BlackBerry’s shares were halted when the surprise announcement was made. Following the reopening of the security, BlackBerry traded down to a low of $8.01 but later closed for the day at $8.73 for a loss of $1.55 or -15.13%. The news could not come at a worse time for BlackBerry as Apple released its new lineup of iPhone last week. BlackBerry said that next week it is expecting to report a net operating loss of $950M to $995M for its quarter that ended August 31. Last month BlackBerry said that is considering all options which includes an outright sale of the company as well as the potential sale of some of its patents. The press release also included a note that BlackBerry will be shifting its efforts from general consumer sales to corporate clients, which many believe are the backbone of the company’s future. However, many believe this may be BlackBerry’s final earnings report. It will be necessary to watch the official earnings announcement next week where the company guidance and outline its sales data.

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