Recap: Week Ending November 22, 2013

November 24, 2013

It was a week for the books as both the Dow Jones Industrial Average and S&P 500 stock indices closed at record levels. The Dow Jones closed above the 16,000 for the first time, and the S&P closed about 1,800 for the first time in its history. Both the S&P and Dow have posted 7 straight weeks of gains. Despite starting the trading week off on a sour note, equities in both the United States and Canada pushed higher later in the week. It must be noted that the NASDAQ 100 was unable to fully recover from the early in the week selloff closing slightly negative on the week. The daily range of all the major indices continues to be the same, indicating that the rally still has some legs to the upside. The TSX has traded in a 200 point range for the past 18 trading days, unable to successfully break the 13,500 level.

As investors look to close up positions for the month of December, the stock market almanac shows that December has been the best month for the Dow since 1950. The S&P has gained 26.5% for the year; the leading sector by far has been the healthcare sector. The healthcare sector of the S&P has boasted an increase of over 37.5% for the year. As the rally pushed forward, it makes many ask how many more buyers exist in the market. The nonstop presence of buyers has driven up markets to levels surpassing many analysis expectations.

One of the main factors pushing the markets higher is the presence of the US Federal Reserve bond buying program Quantitative Easing, QE. For the past year, the US central bank has bought treasury bonds with the intention of flooding the market and lowering interest rates. With lower interest rates, borrowing becomes cheaper, in turn, increasing spending in the economy. The next US Federal Reverse meeting in the middle of December will mark the final one with the Chairman Ben Bernanke in power. Janet Yellen is expected to replace Bernanke in the upcoming year, making her the first women to become head of the US Fed. Yellen is quoted saying “By putting downward pressure on longer-term interest rates and helping to make financial conditions more accommodative, the Federal Reserve’s asset purchases have supported a stronger economic recovery, improved labor-market conditions and helped keep inflation closer to its 2 percent objective” in response to a question asked by a Republican Senator from Louisiana. With confidence from Yellen, stocks continue to be driven higher on “cheap” money. Because of their bond buying programs since December 2008, is sitting at a record balance of $3.91trillion.

The upcoming week is full of key economic data out of Canada and the United States. Monday both the US Pending Homes Sales and the Dallas Fed Manufacturing Business Index will be released. Tuesday the US will report Consumer Confidence for the month of November. Wednesday will be an extremely busy day with 10 economic releases coming from the US. The most watched economic figures will be the Durable Goods Orders for October as well as the Initial Jobless Claims. To close out the week, Canada will report its GDP for the month of September, the consensus is a gain of 0.1%

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