Recap: Week Ending October 25, 2013

October 25, 2013

US stocks closed at all time highs this week, proving that the rally has no apparent limits. The S&P 500 hit all time highs to close the week out at 1759.77. With the close of today, the S&P has gained 23.4% for 2013. To the surprise of many, the Dow Jones Industrials rallied the hardest rising over 1% on the week following the S&P’s 0.835% gain on the week. The Dow has not been able to maintain the gains seen in both the NASDAQ and S&P as it is still 0.90% from making all time highs where the S&P which is currently in uncharted territory. The US markets were also rocked by historical economic figures released by the US government following the lockout. As the Government of the United States locked out workers, many of the economic releases were not broadcasted. This past week saw the release of the unemployment rate which was the most sought after number. The figure came in better than expected at 7.2% while the consensus was 7.3%. This news helped excel markets higher on the week. Out of all the major indices followed by MarketWatch, the Toronto Stock Exchange, TSX, gained the most on the week, closing up 2%. Currently the TSX is on a roll to the upside and has not seen a day with negative conviction in over 11 trading days. In prior months, the TSX has traded in a horizontal range bound chop. As gold has since rallied from its lows, the TSX has followed suit and found aggressive buyers. The TSX is considered by many to be a commodity based index as many natural resource companies are listed on it. Even though gold has caught bid, it must be noted that crude oil, another major export in Canada has been hit hard falling over 3% in the past week. The volume in West Texas Light Crude was extremely strong at the lows, signaling a possible bottom in the downside action.

Currently western equity markets are in the midst of earnings season with earnings out this week from Amazon, Microsoft as well as Netflix. Results from all three companies were sound. According to Reuters, 69% of all organizations which have reported earnings have beat analyst estimates. The average revenue growth is seen at 2.2% for this quarter. However, it must be noted that 54.2% of all reporting companies beat sales, which is below Reuters 61% long term average. One of the highlights on the week was UPS which reported a larger than expected quarterly profit. UPS also noted on their conference call that they expect sales to be heavily increased by a strong holiday season. A strong holiday season for UPS is a good indicator of the overall strength of the global economy.

Looking at the upcoming week the economic calendar is anything but light. On Monday, the US will report pending home sales which is followed by the release of the Japanese unemployment Monday night. Tuesday the Government of Canada will release the September raw materials price index and the US government will release its consumer confidence. Wednesday the Federal Reserve will release its interest rate decision as well as its treasury purchase program. On Thursday, the Bank of Japan will release its interest rate which is believed to be unchanged at 0.1%. Canadian gross domestic product will also be released Thursday. To close the week off we will get the NBS manufacturing PMI from China as well as the US and UK Markit manufacturing PMI for October.

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