Recap: Week Ending March 28, 2014
Stocks around the globe ended the last full trading week of March on a mixed note. The Dow Jones Industrial Average was the only major average in the US to close positive for the week. The NASDAQ was the biggest loser on the week closing down over 2%. As mentioned in previous MarketWatch articles that a weak NASDAQ can be a strong signal of weakness across the board in all equities. The NASDAQ led equities higher last year as well as in the current year. A move down lead by the NASDAQ may be a signal of things to come. The Toronto Stock Exchange’s TSX also finished lower on the week. Equities continue to trade sideways in divergent type activity as the market awaits further guidance on the global economy. It appears now that the market has shifted its attention from geopolitical tensions in Eastern Europe. Even risk off investments such as gold have taken a hit recently, leading many to wonder if the market has just stalled and more upside will continue at a later date. However, like equities, the US 30 year had little volatility in either direction last week. Despite being a business week in terms of economic releases in the US, the markets traded with little conviction. It appears that equities around the globe are waiting next week’s US Federal Reserve FOMC minutes. Meeting meetings are expected to show insight on the possibility of a rate increase following the competition of the bond buying program known as Quantitative Easing.
This past week marks the stress testing on US banks that were run by the US Department of Treasury. A stress test is a valuation of the assets and liabilities which banks currently hold, gauging them on their ability to hold such items in the wake of financial insecurity. In the latest round of stress testing, Citi Group did not pass the test. On the other hand, Bank of America passed the test and was given approval to distribute its first dividend following the financial crisis. According to a statement released by the Treasury Department, Citi Group failed the test due to their processing abilities. Citi was denied the ability to increase its dividend to five cents a share, however, instead is now caring out a $6.4 billion stock buyback program. On a more concerning note, Zions Bank based in Salt Lake City Utah failed the stress test because their capital did not meet Federal minimums in cases of economic strain. Despite the failure of these banks, the financial industry is looking more stable in the United States.
The upcoming week is loaded with economic indicator releases. Monday will see the release of Canada’s GDP for the month of January; the previous reading came in at -0.5% on a month over month basis. On Monday, we will also hear US Fed Chairwomen Janet Yellen speak. Tuesday will see the release of the US ISM Manufacturing, the consensus reading is 54 and the previous ISM came in at 53.2 Wednesday the MBA Mortgage Applications will be released with a previous reading coming in down 3.5%. Wednesday will also see the release of US Factory Orders for the month of February. On a month over month basis the prior reading came in at down 0.7%. The week will close off with a bang as both the US and Canadian Unemployment rates will be released. The Canadian unemployment rate is expected to remain unchanged from its previous reading of 7%. On the other hand, the US unemployment rate is expected to fall from the previous reading of 6.7% to 6.6%.