Recap: Week Ending May 30, 2014

May 30, 2014

Equity markets across the board closed higher as little news related events drove the market. This past week was significant in the S&P500 with the US benchmark equity index hitting new all time highs. The highs in the index come after weeks of consolidated range bound trade. The Dow Jones Industrial Average is currently sitting roughly one days range below making new all time highs. It currently looks that the Dow is setting itself up to enter uncharted territory next week. Like the Dow, the NASDAQ 100 index is sitting just below recent mutliyear highs. It must be noted that all time highs in the NASDAQ were made in the early months of the tech bubble in 2000. The all time high for the NASDAQ is just ticks under the 4,700 mark. With the tech heavy index trading in the lower 3,700s, there is still plenty of room for upside before hitting the wall of resistance at the all time highs. On the other hand, the Russell 2000 Small Cap Index gaped higher this week, however, was unable to withhold the initial push higher, leading to a close at roughly where it opened on the week. The Russell has been a leader to the downside in recent months and can be attributed to much of the sell side pressure other indexes have been put under.

Unlike its US counterparts, the TSX didn’t fair so well with a strong push to the downside off of recent highs made in the previous week. As it currently stands it appears that the Canadian equity index is looking to fall back into a tight trading range which it established during the month of March. The index saw much selling pressure towards the end of the week when CIBC reported a fall in profits but increased their dividend. CIBC reported a second quarter profit of $306M which results to 73cents per share. In the second quarter of last year, CIBC reported a profit of $862M which in turn is a $2.09 profit per share. The main reason behind CIBC’s poor performance this quarter is because of its losses of its CIBC First Caribbean subsidiary. CIBC is not the only Canadian bank to operate in the region with many others feeling the same effects. The Caribbean area has been hit hard following the recession as tourism has yet to enter levels seen prior to the crash.

The largest loser on the week was precious metals, in particular gold. For almost the entire month of May gold traded in a very narrow range. During this time, a large amount of energy was building up, and recently strong sell side activity came into the metals market. It appears that many were selling their gold and purchasing US treasuries as the 10 year note yield hit new lows this week at just over 2.40%. The move comes across at an interesting time as gold is usually a haven for investments when the market goes sour, so it should go higher along side bonds, this is not the case. As the equity market is at all time highs, it appears that many are flocking to bonds for protection of any downside activity which may come. The upcoming week will be crucial to see if more money flows into the fixed income markets and if profit taking arises in equities as indexes begin to enter uncharted territory.

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